Bitcoin mining companies are making a dramatic shift to artificial intelligence (AI) and high-performance computing, moving away from the less profitable traditional crypto mining. This transition comes amid declining mining profits and a significant surge in demand for AI computing power.
Leading firms like IREN, Riot, TeraWulf, and Cipher Mining are reconfiguring their infrastructures through long-term contracts to cater to AI workloads. For instance, TeraWulf and Cipher Mining have entered into decade-long agreements with Fluidstack, an AI cloud provider backed by Google, while Galaxy Digital is transforming its expansive 1,500-acre Texas facility into an AI hub in collaboration with CoreWeave.
The impetus for this strategic pivot is the noticeable decline in mining revenues, exacerbated by Bitcoin price volatility and the halving events that occur every four years, reducing the rewards miners receive. Notably, Bitcoin miners saw a 7% profit drop in September due to these market fluctuations.
“Bitcoin mining just doesn’t cut it anymore,” said Daniel Keller, CEO of InFlux Technologies. “Due to halving schedules, mining is less profitable in the long run than AI computing.”
This realignment also capitalizes on the unique assets Bitcoin miners possess. These firms control valuable land, energy infrastructure, and data centers already linked to power grids, which are assets in high demand as tech giants scramble to increase their AI capacities.
Infrastructure Advantages Drive Interest
Major cloud providers such as Google, Microsoft, and Amazon are facing delays in permitting and grid access for new data centers, which creates a significant opportunity for Bitcoin miners. Analysts from Bernstein estimate that miners can drastically cut data center deployment timelines by up to 75%. The existing, often renewable-powered infrastructure can be adapted to serve AI needs at a fraction of the cost compared to new constructions.
“The access to ready and cheap renewable power combined with data center capabilities positions Bitcoin miners as attractive partners,” wrote Bernstein’s Gautam Chhugani in a recent note.
In a testament to this growing trend, CleanSpark recently announced its entry into the AI data center space, leveraging its existing land and computing assets. Riot has also repurposed parts of its Texas facility for both Bitcoin and AI operations, with plans for the site to become operational by 2026. Riot’s stock has risen by 104% since the start of the year.
IREN, formerly Iris Energy, has taken significant steps by pausing its Bitcoin mining expansion in favor of AI cloud services, recently acquiring 4,200 Nvidia Blackwell chips. This shift has propelled IREN’s stock price over 500% this year alone.
Institutional Investment Signals Confidence
In an encouraging sign for the mining sector, the Jane Street Group recently disclosed passive stakes in several Bitcoin mining companies, claiming approximately 5.4% of Bitfarms, and 5% each in Cipher Mining and Hut 8. This revelation sent shares surging, with Cipher Mining experiencing a 13% jump on the day the news broke, lifting the fortunes of other mining firms as investors saw this as a validation of their business models.
The firm’s Schedule 13G filings indicate their investment strategy is passive rather than activist. Jane Street has emerged as a notable player in the digital assets landscape, accounting for about $110 billion in crypto trading activities in 2023 alone. Their involvement is expected to draw more institutional attention to Bitcoin miners, whose margins have been squeezed in traditional operations.
TeraWulf shares have similarly seen impressive gains, rising by 150% year to date, bolstered by their billion-dollar lease agreement with Fluidstack. Analysts believe the long-term nature of these contracts indicates a fundamental, permanent shift toward AI rather than a mere temporary strategy.
As Bitcoin mining companies pivot towards AI, they set a new narrative in a landscape where profitability and innovation are paramount for survival.
