Cipher Mining Inc. has entered into a 10-year agreement with AI cloud platform Fluidstack to develop and operate a high-performance computing (HPC) data center. The deal, valued at approximately $3 billion in contracted revenue, involves delivering 168 megawatts of power for artificial intelligence infrastructure.
The agreement is financially supported by Google, which will backstop $1.4 billion of Fluidstack's obligations and, in return, receive an equity stake of approximately 5.4% in Cipher Mining. This transaction positions Cipher as a significant developer in the rapidly expanding AI data center sector.
Key Takeaways
- Cipher Mining signed a 10-year HPC colocation agreement with Fluidstack valued at approximately $3 billion.
- The deal includes delivering 168 MW of critical IT load for AI computing at Cipher's Texas facility.
- Google will provide a $1.4 billion financial backstop for Fluidstack's lease and receive a ~5.4% equity stake in Cipher.
- The agreement establishes Cipher as a major developer in the AI data center market, with a remaining pipeline of ~2.4 GW for future projects.
Details of the 10-Year Agreement
The core of the transaction is a long-term colocation agreement between Cipher Mining and Fluidstack. Cipher, a company that owns, develops, and operates industrial-scale data centers, will provide the necessary infrastructure for Fluidstack's AI cloud platform.
This partnership is designed to support the intensive computational needs of modern artificial intelligence applications. The initial term of the contract is set for 10 years, securing a stable revenue stream for Cipher.
Financial and Operational Terms
The agreement is structured as a modified gross lease with annual escalators built in to account for inflation and other factors. Over the initial decade, the contract is expected to generate approximately $3 billion in revenue for Cipher. The terms also include two five-year extension options.
Should both options be exercised, the total contract value could increase to approximately $7 billion over a 20-year period. Cipher anticipates a high-profitability project, with an estimated Site Net Operating Income (NOI) Margin between 80% and 85%.
Project by the Numbers
- Initial Contract Value: ~$3.0 billion over 10 years
- Potential Total Value: ~$7.0 billion with extensions
- Critical IT Load: 168 MW
- Gross Capacity: Up to 244 MW
- Estimated Project Cost: $9-$11 million per MW
Infrastructure and Location
The new HPC data center will be located at Cipher's Barber Lake site in Colorado City, Texas. Cipher will deliver 168 megawatts (MW) of critical IT load, supported by a maximum of 244 MW of gross capacity. The delivery of this capacity is expected to be completed by September 2026.
The Barber Lake site is well-suited for such a large-scale project, with currently energized capacity and the potential for a 500 MW expansion. The facility sits on 587 acres, providing ample room for future growth to meet the demands of next-generation computing.
Google's Strategic Investment and Financial Backing
A significant component of this deal is the involvement of Google. The tech giant will backstop $1.4 billion of Fluidstack’s lease obligations to Cipher. This financial guarantee is crucial for securing the project-related debt financing needed to build out the data center infrastructure.
This backing significantly de-risks the project for Cipher and its investors, providing a strong financial foundation for the long-term agreement. It also signals confidence from a major technology leader in the project's viability and importance.
Equity Stake in Cipher Mining
In exchange for its financial support, Google will receive warrants to acquire approximately 24 million shares of Cipher common stock. This translates to an approximate 5.4% pro forma equity ownership stake in the company.
The agreement notes that this stake is subject to adjustment and could potentially be settled in cash under certain circumstances. This move makes Google not just a financial backer but also a direct stakeholder in Cipher's future success.
What is High-Performance Computing (HPC)?
High-Performance Computing refers to the practice of aggregating computing power in a way that delivers much higher performance than one could get out of a typical desktop computer or workstation. It is essential for processing massive amounts of data and running complex simulations, which are foundational to modern AI model training and large-scale scientific research.
Strategic Implications for Cipher Mining
This transaction marks a pivotal moment for Cipher Mining, transforming its position in the technology infrastructure landscape. Previously known for its focus on bitcoin mining, the company is now established as a major developer for the AI and HPC sectors.
"This transformative transaction reinforces our HPC momentum as we continue to attract attention for our large and growing pipeline of sites," said Tyler Page, CEO of Cipher. "We believe this transaction represents the first of several in the HPC space as we continue to scale our capabilities and strengthen our position in this rapidly growing sector."
The company plans to retain 100% ownership of the project. It will access capital markets as needed to fund its portion of the development, which is estimated to cost between $9 million and $11 million per megawatt of critical IT load.
Future Growth and Market Position
Even after committing 168 MW to the Fluidstack project, Cipher maintains a substantial development pipeline. The company reports it has approximately 2.4 gigawatts (GW) of capacity being prioritized for future HPC projects. This positions Cipher to capitalize on the surging demand for specialized data centers driven by the AI boom.
César Maklary, Co-Founder and President of Fluidstack, highlighted the importance of the partnership. "Together with Cipher Mining, we’re committed to accelerating the development of critical infrastructure on which frontier AI companies depend," he stated.
The collaboration between an infrastructure developer like Cipher, an AI platform like Fluidstack, and a technology giant like Google illustrates the complex, capital-intensive ecosystem emerging to support the future of artificial intelligence.
