Why Did TeraWulf Stock (WULF) Skyrocket 16.8% Today?

Shares of TeraWulf (NASDAQ: WULF) soared on Tuesday, finishing the day up 16.8%. The move comes as the S&P 500 (SNPINDEX: ^GSPC) and the Nasdaq Composite (NASDAQINDEX: ^IXIC) gained 0.2% and 0.8%, respectively.

The data center builder's stock flew higher after the company announced a new 25-year deal worth $9.5 billion. The company also released preliminary numbers for its third quarter, revealing an 84% jump in revenue year over year (YOY).

TeraWulf stock jumps on Google-backed deal

The company is teaming up with the artificial intelligence (AI) cloud computing provider Fluidstack to build a nearly 170 MW data center in Abernathy, Texas. The two companies will have joint ownership, with TeraWulf owning 51% of the venture. The deal amounts to $9.5 billion in total contract revenue and includes a $1.3 billion backstop from Alphabet's Google that will help TeraWolf acquire financing to complete construction of the data center.

The company expects the first phase of the buildout to be completed in 2026.

Image source: Getty Images.

Is TeraWulf a buy?

I have serious concerns about TeraWulf and other data center companies racing to build capacity. Terawulf already has substantial debt and is taking on much more to fund construction. If there is an overbuild of compute capacity that outpaces future AI demand, Terawulf could find itself in a pretty precarious position.

Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.