The growing demand for computing power to train and power artificial intelligence (AI) models is reshaping the bitcoin (BTC) mining landscape. The companies that have known how to take advantage of their infrastructures to enter the world of AI are being rewarded with a higher market valuationwhile those that remain focused exclusively on cryptocurrency mining see their shares stagnate. In relation to this, Matthew Sigel, head of digital asset research at the financial company VanEck, published on October 8, 2024 on the AIs. These are Core Scientific, Tera Wulf and IREN, which diversified their business model during the last 12 months. The VanEck analyst compared these shares with the quotes of other financial assets and mining companies that do not invest in AI or have recently begun to do so.
Shares of Core Scientific and Tera Wulf grew 254% and 83% in the last 12 months. Source: X. The graph shows how the actions of Core Scientific have grown up in a 254%, 83% Tera Wulf and IREN 21% in the last 12 months. In that same period, the first two have widely surpassed other assets such as bitcoin itself (+48%), the stock market indices of the American stock market S&P 500 (+20%) and the Nasdaq 100 (+19%). Meanwhile, IREN showed a similar performance to these indices.
Other bitcoin miners have not had the same fortune
On the other hand, in the last 12 months, the actions of BTC mining companies that have not yet announced or mobilized their insertion into the AI industry have been in decline. Such is the case with three of the largest companies, such as Riot Platforms (RIOT), Marathon (MARA) and CleanSpark (CLSK). The price of its shares during that time fell between 50%, 30% and 13% respectively. According to a VanEck report from mid-August 2024, these three companies had not issued official announcements implying future plans tied to the AI industry. On Monday, October 7, 2024, Riot Platforms executives stated that they would be open to opportunities to enter the AI industry, if an agreement with the appropriate conditions arose. Marathon, although it has not explicitly expressed operations linked to AI, on September 27, 2024, its CEO Fred Thiel, did give indications of this. He explained that MARA's two-phase immersion technology would be an efficient solution for the AI industry. This technology consists of submerging electronic components in a dielectric liquid, which rreduces water consumption and increases energy efficiency of AI data centers. In conclusion, the Core Scientific (CORZ) and Tera Wulf (WULF) and IREN (IREN) strategies could be an alternative to counteract the decline in profits obtained from bitcoin mining and the operating costs of this task. As explained in a previous note, investors are showing a preference for companies that diversify their operations to include AI and High Performance Computing (HPC) services.
2024 is a challenging year for Bitcoin miners
The JP Morgan bank, in early October 2024, determined that in September mining profitability fell for the third consecutive month. Among other factors, he noted that the difficulty of BTC mining increased by 9%. In addition to this, the Coin Metrics analysis platform detailed in a report dated October 8, 2024 that bitcoin mining revenue decreased to $2.5 billion in the third quarter. This compared to the 3.7 billion dollars of the previous quarter, mainly due to halving April 2024.
Core Scientific's alliance with the AI industry
Bitcoin mining companies that were early adopters of AI, such as Core Scientific (CORZ), are beginning to reap the fruits of this technological transition. A clear example is the 12-year contract with CoreWeave, an agreement that is estimated will generate more than $3.5 billion in cumulative revenue. This is thanks to the provision of 200 megawatts of energy to power the artificial intelligence systems of the company CoreWeave. Core Scientific, after filing for bankruptcy at the end of 2022 and completing its restructuring, returned to the Nasdaq stock market on January 24. Less than a year later, thanks to the foray into AI, its actions cause great attraction for market investors. For its part, Tera Wulf announced on October 3, 2024 the sale of its 25% stake in the Nautilus Cryptomine joint venture to its subsidiary Talen Energy. This transaction resulted in a considerable profit, generating a return on investment of more than three times its original value.
The funds obtained from this sale will be used to expand the company's operations in the HPC, AI and Bitcoin mining sectors at its Lake Mariner facility. The integration of artificial intelligence in bitcoin mining or the transition to business models that include it is redefining the landscape of this industry. As the demand for computing power grows, companies that are knowing how to take advantage of this synergy between bitcoin mining infrastructure and artificial intelligence are quickly positioning themselves as leaders of a new niche. This is expressed by the stock market price of its shares.