Driven by the artificial intelligence wave, data center construction has become a critical infrastructure segment. Cipher Digital (CIFR) has established a foothold in power and site supply through its colocation model and long-term contracts, while Sterling Infrastructure (STRL) is expanding rapidly in the data center construction space through its electronic infrastructure business and acquisition strategy. Although neither company is directly involved in chip manufacturing, both occupy an indispensable infrastructure segment of the AI industry chain, and as demand for computing power continues to grow, their business value and revenue visibility are expected to rise further.
Cipher Digital is committed to building AI data centers at scale. Its colocation business model works as follows: the company builds the data center site and ensures power supply, while hyperscale tenants bring in their own chips.
This strategy reduces Cipher Digital’s spending on each data center, but its annual contract value is relatively low compared with the contract value that neocloud providers can obtain. Although Cipher Digital cannot price the way neocloud providers do, it can still secure high-value, long-term annual revenue from tenants, and it is growing rapidly.
For example, the company expects its annualized net operating income to jump from $97 million this year to $686 million next year. The company also tends to sign 10-to-15-year contracts with tenants, which gives it predictable cash flow.
Including the capacity in its development pipeline, Cipher Digital currently has a project portfolio of 5.3 gigawatts, including an option recently secured for a 900-megawatt site near San Antonio. The company also recently began developing a lateral pipeline across multiple facilities. This move could add up to 2.5 gigawatts of power to Cipher Digital’s project portfolio. In the press release announcing the initiative, CEO Typer Page said the plan could help the company “unlock a large amount of new capacity quickly.”
As AI infrastructure construction continues to expand, companies like Cipher Digital will become more valuable.
Data centers are a major theme in artificial intelligence, but all facilities must first be built before technology giants can use them. Sterling Infrastructure is a leading construction company in the AI data center space, and its second-quarter revenue grew 90% year over year.
Its electronic infrastructure segment, which includes the data center business, is the main catalyst. Revenue in that segment nearly tripled year over year, and Sterling Infrastructure has been making acquisitions to gain market share faster. For example, Stone Ridge Contracting, which the company acquired in June, is directly related to data centers. And each time it integrates a peer into its operating system, it becomes harder for the remaining competitors to make progress.
Electronic infrastructure is also a higher-margin opportunity than Sterling Infrastructure’s other segments. This is exactly why the company has been reallocating some resources from transportation projects to electronic infrastructure.
The electronic infrastructure segment is also the main reason the company has a backlog of $4.3 billion. That figure is equivalent to more than a quarter of the company’s market capitalization. If unsigned but high-probability deals listed in Sterling Infrastructure’s second-quarter earnings presentation are included, total revenue visibility exceeds $7 billion.
