Bitcoin miners are navigating a transformative period as many pivot towards the burgeoning AI sector amidst Bitcoin’s recent underperformance. Analysts from Bernstein highlight that these miners are increasingly becoming vital players in the AI value chain, providing necessary computational resources for major tech companies, referred to as hyperscalers. This strategic alignment has led to Bernstein assigning “outperform” ratings to several key mining companies, including IREN, Riot Platforms, CleanSpark, and Core Scientific. In contrast, MARA Holdings received a “market perform” rating, with updated price targets reflecting significant potential upside for these firms.
For example, Bernstein set IREN’s price target at $100, indicating over a 100% upside from its current valuation. Riot Platforms was assigned a price target of $25, demonstrating a more modest expected gain. Meanwhile, CleanSpark’s target is now at $24, up from $14 as of the latest trading session, and Core Scientific is also set at $24, reflecting a slight increase. Despite this positive outlook, shares of companies, with the exception of CleanSpark, experienced declines on Tuesday morning.
In their analysis, Bernstein noted that bitcoin miners have established collaborations with hyperscalers and other cloud service providers, amounting to more than $90 billion in deals centered around 3.7 gigawatts of power. These partnerships point to a growing demand for computational power, with bitcoin miners, who have over 27 gigawatts of planned energy capacity, positioned favorably in this burgeoning environment.
Gautam Chhugani, a lead analyst at Bernstein, pointed out that the primary bottleneck for AI cloud expansion is power availability, underscoring the miners’ advantage in possessing grid-connected power in data center hotspots like Texas. While the average wait for securing 1 gigawatt of power is a lengthy 50 months nationwide, existing miners benefit from pre-approved sites and solidified contracts in the power market. A significant portion of recent deals—one-third, according to Chhugani—has been struck with hyperscalers, including a partnership between IREN and Nvidia for 5 gigawatts of AI compute resources.
Despite the optimism, challenges persist, including legal and regulatory hurdles, as well as public scrutiny surrounding the environmental impacts of data centers. Nevertheless, miners maintain certain advantages over new market entrants, thanks to their established presence and understanding of the energy landscape.
Industry voices, such as Nic Puckrin, co-founder of Coin Bureau, advise caution. He states that while the opportunity for bitcoin miners to adapt their existing infrastructure to meet AI demands is robust, not every miner making the switch will succeed. Parameters such as stable, low-cost energy, flexible agreements, and robust cooling systems are critical for a successful transition.
Other firms like Cango also maintain that bitcoin mining remains essential to their operations. However, there is recognition of a significant opportunity beyond mere mining. Juliet Ye, Cango’s head of investor relations, expressed confidence in their ability to leverage their grid-connected energy resources to address the ongoing power gap in the AI sector.
The current cyclical downturn for miners marks a distinct shift from previous cycles. Analysts at TheEnergyMag note that while in earlier downturns miners would often shut down operations due to falling bitcoin prices, today, they are increasingly transitioning to AI infrastructure for steadier revenue streams and higher returns.
However, Wolfie Zhao of TheEnergyMag underscores that transitioning to AI and HPC (High-Performance Computing) is far more complex than previous shifts in bitcoin mining locations. This transition requires miners to evolve into adept data center operators, responding to more rigorous operational demands than those associated with traditional bitcoin mining.
Amid these developments, Benchmark Managing Director Mark Palmer reiterated a “buy” rating on Bitdeer, highlighting the company’s commitment to its AI pivot following the sale of all its Bitcoin holdings earlier this year. He sees potential for a colocation lease in Norway to serve as a catalyst for a revaluation of the company’s vast power and infrastructure portfolio.
Overall, while bitcoin miners are strategically positioning themselves within the AI value chain, the complexity of this transition means only a select few may thrive in this evolving landscape.
