As the challenges of cryptocurrency mining increase, major mining companies are seeking alternative paths. Core Scientific (CORZ, Financial) has seen its stock skyrocket by nearly 300% over six months following a series of collaborations with AI enterprises. TeraWulf, another mining firm developing AI data centers, has also experienced a stock price doubling this year.
The upcoming Bitcoin halving, which reduces mining rewards, has prompted more mining companies to pivot toward AI. Core Scientific announced a multi-billion-dollar agreement with AI startup CoreWeave. The company plans to upgrade parts of its data centers to host over 200 megawatts of GPUs for CoreWeave.
Other mining companies embracing AI, such as Iris Energy and Bit Digital, have outperformed peers who primarily focus on holding Bitcoin. These companies believe AI training offers more stable and secure income compared to the volatile cryptocurrency market.
Since Bitcoin's inception in 2009, mining rewards have halved four times, with the latest reduction set for April 2024, bringing the reward down to 3.125 BTC per block.
Despite the trend towards AI, some companies remain committed to Bitcoin mining, such as MARA Holdings, Riot Platforms, and CleanSpark. Known as "hodlers," these firms retain their mined Bitcoin, expecting future appreciation. Unfortunately, their stocks have underperformed, with MARA and Riot declining by 17% and 36% respectively this year.
Analyst Paul Golding from Macquarie Capital USA believes pure Bitcoin mining still holds relevance in the current market, particularly in expanding mining capacity to create economic value. He rates MARA, Riot, Core Scientific, Iris Energy, CleanSpark, and Cipher Mining as "outperforming the market."
JPMorgan suggests that Bitcoin miners can diversify beyond traditional mining by leveraging their electrical and computational resources to become high-performance computing and AI hosting centers, opening new revenue streams. By collaborating with or acquiring these miners, tech giants can harness valuable resources to bolster their AI capabilities.
Investors should exercise caution as the market carries risks. This article does not constitute personal investment advice and has not considered individual financial situations or goals.
