Due to the "halving" leading to a reduction in mining rewards, an increasing number of mining companies are seeking new ways to survive. Six months after the Bitcoin halving, mining companies are turning to AI.
On October 20th, it was reported that U.S. Bitcoin miner Core Scientific's stock has almost tripled since announcing a series of billion-dollar contracts with AI startup CoreWeave. The mining company will transform part of its data centers to host over 200 megawatts of GPUs for CoreWeave.
The stock price of TeraWulf, a mining company developing AI data centers, has also doubled this year. Other Bitcoin mining companies that have embraced AI, such as Iris Energy and Bit Digital, have generally outperformed their peers who focus on holding Bitcoin.
As the days of "mining" become increasingly difficult, major mining companies are seeking transformation. Major Bitcoin miners are replacing some mining equipment with devices used to run and train AI systems. These companies believe that AI training provides more stable and secure income than the volatile cryptocurrency market.
Since the emergence of Bitcoin in 2009, mining rewards have experienced four halvings. The first halving occurred in November 2012, reducing the reward from 50BTC to 25BTC. The following two halvings took place in 2016 and 2020. Most recently, in April 2024, the mining reward was halved again, dropping to 3.125BTC per block.
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Some mining companies stick to Bitcoin, and their stock performance is bleak.
Although many mining companies are actively turning to AI, some companies are still focusing on the business of mining and holding Bitcoin.
For example, mining companies such as MARA Holdings, Riot Platforms, and CleanSpark are staunch "hodlers" of Bitcoin (Hodl is an industry term, meaning to hold cryptocurrencies for the long term).
They retain the Bitcoin they have mined and look forward to the asset's continued appreciation in the future.However, the stock performance of these companies has been quite bleak. The two major listed Bitcoin mining companies, MARA and Riot, have seen their stock prices fall by 17% and 36% respectively this year.
Nevertheless, Paul Golding, an analyst at Macquarie Capital USA, believes that pure Bitcoin mining still has a place in the current market, especially in terms of expanding mining capabilities to create economic value.
He has given "outperform" ratings to MARA, Riot, Core Scientific, Iris Energy, CleanSpark, and Cipher Mining.
JPMorgan analysis suggests that Bitcoin miners are no longer limited to traditional mining operations; they can also leverage their own power and computing resources to flexibly transform into high-performance computing (HPC) and AI computing hosting centers, thereby opening up new sources of revenue. Technology giants can gain valuable power resources by collaborating with these mining companies or directly acquiring them, thereby expanding their own computing power and promoting further development of AI business.