Bitcoin miners venturing into the AI data-center market face a substantial funding gap, estimated at $50 billion in the near term, according to a recent report by VanEck. Over the long term, the capital requirements for these miners could escalate to around $221 billion, indicating the financial challenges they must overcome.
VanEck, a well-established investment platform, suggests that investors should be reevaluating how they gauge the value of mining firms. The shift towards artificial intelligence infrastructure means that gross energy output should be a primary consideration rather than solely Bitcoin production. This change comes at a time when several prominent mining companies, such as Cipher Mining, Hut 8, and TeraWulf Inc., have secured lucrative AI leases, trading at valuations significantly higher than those of their peers.
The report highlights that companies actively pursuing AI opportunities and having established significant leases are currently commanding prices over ten times their gross energized power. In contrast, firms like Marathon Digital Holdings and CleanSpark, which are still in the marketing phase for future capacity, are trading at valuations of approximately 2 to 6 times their energetic power.
One standout example is Cipher Mining, which recently entered into a $5.5 billion, 15-year lease with Amazon Web Services (AWS) to provide 300 megawatts of AI capacity starting in July. Similarly, Hut 8 has secured a $9.8 billion lease for 352 MW in Texas alongside a $7 billion deal in Louisiana with Fluidstack, a company backed by Google. TeraWulf is also expanding its footprint through a $3.7 billion contract with Fluidstack, backed by a $1.8 billion investment from Google in exchange for equity.
However, the VanEck report cautions that these miners have collectively delivered only about 25% of their leased capacity thus far. Moving forward, successful execution of these projects will be crucial, as companies missing delivery targets face significant revaluations. Marathon has already been flagged by analysts for caution surrounding its strategic pivot to the AI sector despite its recent acquisition of Long Ridge for potential growth.
VanEck has identified HIVE Digital Technologies as one of the more aggressive funding stories within the sector, with capital needs exceeding its current market value as it pushes to develop AI Gigafactories. The report indicates that HIVE, along with Bit Digital, Wytec International, and IREN, potentially holds substantial valuation upside, while names like Marathon, CleanSpark, TeraWulf, and Core Scientific are approaching their fair value estimates.
The report underscores the evolving nature of mining operations, asserting that as companies lock in long-term AI contracts, the quality of tenants becomes increasingly important. Miners engaging with investment-grade hyperscalers can expect to lower their financing costs significantly when compared to the traditional Bitcoin mining landscape.
Consequently, many firms are turning to credit markets for extensive funding. For instance, Hut 8 is actively seeking up to $3.25 billion in senior secured notes for its operations in Louisiana, while Cipher is aiming to raise $810 million for its AWS-supported facility.
VanEck anticipates that numerous AI-focused miners will evolve to resemble data-center real estate investment trusts, or become attractive acquisition targets, which will heighten the importance of financing and operational execution in the eyes of investors.
In market movements, the VanEck Digital Assets Mining ETF recently saw a more than 2% decline in pre-market trading, with retail sentiment around the fund registered in the ‘neutral’ zone, indicating steady but cautious investor attitudes in this rapidly changing landscape.
