Bitcoin miners are increasingly transitioning into high-performance computing (HPC) amid declining mining profitability and rising demand in the sector. This shift raises questions about the long-term future of bitcoin mining, as once miners pivot to supporting artificial intelligence (AI) workloads, returning to bitcoin may not be feasible.
During the 2024 presidential campaign, Donald Trump expressed a desire for all future bitcoin mining to occur within the United States. As president, he has made efforts to fulfill this promise, even involving his sons, Eric and Donald Jr., in establishing their own mining firm. However, experts suggest that America’s burgeoning AI demand might compel bitcoin miners to relocate operations overseas.
John Todaro, managing director at Needham and Company, notes that the U.S. has the infrastructure necessary to support data centers, giving it an advantage over many international regions. He forecasts that as the AI market expands, bitcoin mining may increasingly find its home in areas with lower power costs—diminishing its presence in the U.S.
Although a migration abroad may seem detrimental, it could actually alleviate competition for the remaining domestic miners, potentially enhancing profitability in what has historically been a tight-margin industry. Yet, this shift may tie U.S. firms to the volatility of the AI market, which poses its own risks should that bubble burst.
Bitcoin miners have traditionally been the backbone of the cryptocurrency landscape, investing billions in hardware and infrastructure even during downturns, such as the 2022 crypto winter. However, rising costs and competition from exchange-traded funds (ETFs) and new digital treasury companies have strained miner profitability and stock performance.
Currently, the landscape has shifted dramatically. Investors now view bitcoin mining firms as high-performance computing entities due to their upgraded capabilities. Todaro observed an impressive revaluation trend, where these companies could attract multiples of 15x to 20x based on future earnings. This contrasts sharply with the lower multiples afforded to traditional bitcoin mining firms, which have often struggled for valuation in recent months.
The economic dynamics favoring HPC are compelling. Bitcoin miners face fierce competition for the limited bitcoin rewards available daily, whereas HPC data centers can secure long-term contracts, ensuring steady revenue streams over 10 to 15 years. This model promises much higher profit margins—typically ranging from 75% to 90%—in contrast to the uncertain margins of bitcoin mining.
However, this pivot to HPC is not without its challenges. The sustainability of the AI bubble has been questioned, and should a major client go bankrupt or cease operations, it could jeopardize the profitability of the contracts signed. While large cloud service providers like Google, Microsoft, and Amazon have low bankruptcy risks, smaller AI-focused cloud companies may not share that stability.
Todaro highlights that many smaller service providers are increasingly backed by larger, established hyperscalers, offering a measure of security. Contracts supported by giants such as Google provide a more promising outlook for the longevity of these relationships.
As miners consider this pivot, the lasting impact on bitcoin mining remains uncertain. In an ideal scenario, U.S. miners transitioning to HPC could stabilize the industry, potentially enhancing profitability and market share for those who remain committed to bitcoin mining. However, with structural changes underway, the future landscape of cryptocurrency and high-performance computing may not look the same as it once did.
