Many companies born as cryptocurrency miners are pivoting to the world of artificial intelligence (AI) infrastructure. Some are abandoning crypto mining wholesale.
Those moves have profound implications for shares of those firms and ETFs such as the CoinShares Bitcoin Mining ETF (WGMI). As one example of mining-to-AI transition playing out, Cipher Digital Inc. (CIFR) – WGMI’s largest holding – recently renamed itself to better reflect its move from a crypto mining outfit to a company focusing on crucial areas of the AI expansion.
Cipher isn’t the only WGMI holding to assert itself in the AI infrastructure. Other members of the ETF’s roster, including IREN Limited (IREN) and TeraWulf Inc. (WULF), are leveraging their high-performance computing capabilities to woo hyperscalers and diversify their revenue streams. Another prominent example of this theme is Keel Infrastructure (KEEL).
From Bitcoin Miners to AI
Understanding the shifts by WGMI member firms isn’t difficult. Bitcoin mining is a tough racket. With each halving, the pursuit becomes more complex, producing reduced rewards. And with Bitcoin’s recent slide, mining is less profitable. This underlines that the industry can be, and often is, volatile. On the other hand, providing power to AI clients provides WGMI holdings with long-term contracts and more revenue clarity.
“Riot Platforms (RIOT), Iris Energy (IREN), and Hut 8 have each announced plans to redirect significant power capacity toward AI clients,” reports Finance Magnates. “Analysts estimate that by end of 2027, up to 20% of the Bitcoin mining industry’s total power capacity could be repurposed for AI and HPC workloads.”
The three companies mentioned above are also top 10 holdings in the actively managed WGMI, which turned four years old in February. A key part of mining-to-AI investment thesis is that WGMI member firms don’t have to stretch to get there. They already have the technology needed to power the rapidly growing data center segment. As such and it’s a point made in the Finance Magnates article, a time may soon come that analysts and investors assign data center multiples, which are higher, to WGMI holdings rather than the lower Bitcoin mining multiples.
“A successful transition from volatile commodity production to infrastructure-as-a-service — with long-term leases and predictable cash flows — implies a substantial multiple re-rating. That’s the bet these companies are making,” according to the publication.
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