Following bitcoin’s halving last year, mining of the largest cryptocurrency got harder and became more expensive. The quadrennial event also provided miners with impetus to continue diversifying their revenue streams.
Some members of the industry, including some companies residing in the CoinShares Valkyrie Bitcoin Miners ETF (WGMI), got the message. Increasingly, crypto miners are leveraging their technological capabilities in the realms of artificial intelligence (AI) and hyper-computing (HPC). These are two fast-growing segments that could provide long-term value to WGMI holdings and their investors.
Take the case of Canadian bitcoin miner Bitfarms, which is a WGMI component. The company announced last Friday that it hired consultants to help make AI and HPC inroads.
“Based on active discussions over the past several months with potential HPC/AI partners and customers, we are confident that our North American portfolio pipeline, particularly sites located on the PJM grid, is strongly suited for HPC/AI,” said CEO Ben Gagnon in a statement. “The contracts associated with HPC/AI customers provide long-term, steady cash flows and earnings [streams. Our] Bitcoin mining operations will continue to monetize Bitcoin’s flexible upside [potential. This will create] a powerful and resilient portfolio that will generate long-term value for our shareholders.”
AI Beckons for WGMI Holdings
Riot Platforms (RIOT) is another example of a WGMI holding that’s expanding into AI and HPC. That’s motivated in part by the increased difficulty of mining bitcoin following the 2024 halving.
“Following Bitcoin’s fourth halving in April 2024, which cut miners’ revenue in half, mining companies have tried to diversify their operations, moving beyond pure crypto mining toward hosting infrastructure for AI and HPC. Riot Platforms on Jan. 21 launched a formal process to evaluate the feasibility of directing power capacity at its facilities toward AI and HPC uses,” reported Jason Shubnell for The Block.
Core Scientific (CORZ), the largest WGMI holding, is considered an AI leader among bitcoin miners. In a note out last week, Bernstein analyst Gautam Chhugani said the WGMI component offers value after a recent pullback. The analyst pointed out that 70% of Core Scientific’s capacity is devoted to AI. But its valuation is more comparable to mining peers, implying the shares are inexpensive. The company is tethered to data center expansion.
“Bitcoin miners have a 12-18 month finite window to build a hybrid data center business, while the hyperscaler capex remains consistent,” observed Chhugani.
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