Bitcoin miners aiming to transition into AI infrastructure are confronted with a significant funding shortfall of approximately $50 billion in the near term, along with potential long-term capital requirements reaching $221 billion, according to a recent report by VanEck.
The analysis reveals a shift in investor focus from the initial excitement of AI contract announcements to the practical challenges of financing, constructing, and operating the necessary data centers. Currently, only about 25% of the AI and high-performance computing (HPC) capacity that has been leased is operational.
Griffin MacMaster, an investment analyst at VanEck, noted, "Execution, not signing, becomes the next premium," emphasizing the importance of meeting construction milestones to avoid "structural de-ratings" in valuations.
This report comes during a pivotal time for the bitcoin mining sector, which has seen a decline in profitability since the 2024 halving. In response, many miners have redirected their power infrastructure to accommodate AI workloads, anticipating that tech firms will offer higher payments for electricity and data center resources than bitcoin mining operations.
For instance, Core Scientific (CORZ) has entered into a multi-billion-dollar hosting agreement with AI firm CoreWeave, marking its transition from a bitcoin miner to an AI infrastructure provider. Other companies like TeraWulf (WULF), Hut 8 (HUT), Iren (IREN), and Cipher Mining (CIFR) have also announced plans to lease power and data center capacity to AI and HPC clients. Meanwhile, Marathon Digital (MARA), Riot Platforms (RIOT), and CleanSpark (CLSK) are pursuing hybrid strategies, maintaining their bitcoin mining activities while exploring AI opportunities.
Despite a roughly 24% drop in bitcoin's value since January, many bitcoin miners have experienced substantial stock gains, reflecting a shift in investor sentiment toward AI. For example, RIOT's stock has surged nearly 94% year-to-date, while CIFR has risen by 62%.
This new narrative has contributed to significant stock movements within the crypto industry, with valuations increasingly reflecting the AI potential of these companies rather than their mining operations.
However, VanEck highlights that determining valuations remains challenging due to the dual nature of these businesses—struggling mining operations alongside nascent AI ventures that have yet to yield substantial cash flow.
Currently, the most reliable valuation metric appears to be "energized power," which refers to the operational power infrastructure available to a company. Firms with established AI leases tend to have valuation multiples exceeding ten times their energized power, while those still seeking future projects are valued lower.
VanEck anticipates that the market will increasingly prioritize tenant quality, with operators serving investment-grade hyperscalers likely to enjoy more favorable financing conditions and higher valuations compared to those collaborating with smaller AI startups.
The report identifies HIVE, Bitdeer (BTDR), Keel, and IREN as companies with upside potential if they secure further contracts, while companies like MARA, CLSK, and RIOT are expected to remain closely linked to bitcoin price fluctuations.
Ultimately, VanEck believes that the future of the industry will focus less on announcing AI initiatives and more on demonstrating the capacity to finance, construct, and operate large-scale infrastructure. The firms that succeed will be those capable of transforming leased megawatts into operational data centers within budget and on schedule.