TeraWulf Inc. (NASDAQ: WULF) saw its shares tumble 8.1% to $19.20 on Tuesday, more than double the losses of its AI-infrastructure peers, as the market digested the financing implications of a massive 20-year lease agreement with Anthropic. The stock hit an intraday low of $18.63, with volume surging past 36.7 million shares by early afternoon, well above its daily average. This move came despite a broadly positive session for tech stocks, with the Nasdaq closing up about 0.7%.
The lease, valued at roughly $19 billion in contracted revenue over its initial term, involves 401 megawatts of critical computing load. TeraWulf expects the first capacity to come online in the second half of 2027, with the full campus operational by early 2028. However, the deal hinges on securing approximately $3.5 billion in project debt financing for a Kentucky facility, a sum that CFO Patrick Fleury indicated would be needed this year. The company has not issued any press releases or SEC filings since July 6, leaving traders to rely on earlier commentary.
Leverage and interest cost concerns
The potential debt load has sparked scrutiny of TeraWulf's capital structure. As of March 31, the company reported $5.8 billion in debt and $3.1 billion in cash, equivalents, and restricted cash. Adding the $3.5 billion Kentucky loan would push gross debt to roughly $9.3 billion, nearly matching TeraWulf's equity value of about $9.5 billion based on Tuesday's share price and 495.5 million shares outstanding. First-quarter interest expense surged to $67.1 million from $4 million a year earlier, underscoring the cost of leverage.
Illustrative calculations show that annual interest on the $3.5 billion loan could range from $210 million at a 6% rate to $350 million at 10%, consuming 22% to 37% of the average $950 million annual lease revenue. The current coupon on TeraWulf's $3.2 billion secured notes is 7.75%, implying $271 million in annual interest. These figures exclude principal payments, underwriting costs, operating expenses, and maintenance capital, but they highlight how changes in borrowing costs could pressure equity returns.
Peer comparison and market context
TeraWulf's decline outpaced that of other AI data-center developers. IREN Ltd. (NASDAQ: IREN) fell 3.5%, Applied Digital Corp. (NASDAQ: APLD) dropped 3.5%, and Core Scientific Inc. (NASDAQ: CORZ) slipped 2.4%, averaging a 3.1% decline. Bitcoin rose 3.7% to near $64,555, indicating that TeraWulf's slide was driven by company-specific capital structure and timeline concerns rather than broader crypto weakness.
Lifeline from Abernathy stake sale
To ease financing pressures, TeraWulf plans to sell its 50.1% stake in the Abernathy venture for $530 million, a nearly 18% gross premium over its $450 million investment, before costs and taxes. However, the payout is staggered: $250 million due 14 days after the July 6 agreement, $150 million by year-end, and the final $130 million by April 30, 2027. This timeline provides only partial near-term relief against the $3.5 billion Kentucky debt.
CEO Paul Prager called the Anthropic deal a validation of the company's strategy, establishing a long-duration revenue stream. Clear Street analyst Brian Dobson noted the lease supports his view that TeraWulf's pipeline is worth substantially more than current valuation implies. Yet Tuesday's trading suggests investors are focusing on the cash and time required to execute.
Execution risks and investor focus
With investment-grade credit support, TeraWulf could potentially secure lower-cost project debt, and timely delivery of the Abernathy payout and construction milestones could ensure steady lease revenue. Conversely, rising borrowing costs, cost overruns, delays, or weaker credit backing could shrink payouts to common shareholders. The margin for error is thin.
Investors are now looking past the headline contract numbers to the specifics of the loan: interest rate, amortization schedule, covenants, and equity contribution required. None of those terms have been disclosed, making it difficult to project future equity cash flow. Until more details emerge, the market appears to be pricing in significant uncertainty over the ultimate returns from what is otherwise a landmark AI infrastructure deal.
