The "valuation logic" of "Bitcoin miners": "Generating power for AI" is several times more than "mining Bitcoin"

The valuation logic of Bitcoin mining companies will undergo a fundamental reconstruction. With ready access to power grids, these companies are rapidly transforming into technology infrastructure providers. The ability to immediately supply power to AI data centers has become a core advantage, helping Bitcoin mining companies gradually break free from the constraints of the cryptocurrency cycle.

On October 19, according to media reports, funds tracking listed mining companies have surged over 150% this year, far exceeding Bitcoin's 14% increase. The stock prices of Cipher Mining and IREN Ltd. have skyrocketed by approximately 300% and 500%, respectively. Behind this performance is a repricing of these companies by investors—no longer relying on mining revenues, but focusing on their AI infrastructure value.

Investment bank Needham & Co. analyst John Todaro stated:

“Investors are almost entirely valuing Bitcoin mining companies based on the HPC/AI opportunity. In our conversations with mining companies, the actual proportion related to Bitcoin and Bitcoin mining is less than 10%.”

This valuation difference stems from a key fact: U.S. Bitcoin mining companies have approximately 6.3 gigawatts of operational sites and 2.5 gigawatts of capacity under construction, making them the 'fastest to obtain power and lowest execution risk' choice for AI companies. Against the backdrop of a 45-gigawatt power gap for large data centers in the U.S. between 2025 and 2028, the value of these ready power resources is highlighted.

Reconstruction of Trading Logic

In fact, trading is currently operating under the logic of "powering AI." Earlier this year, Cipher Mining signed a month-long agreement with Fluidstack, partially supported by Google, to validate a 10-year, approximately $3 billion hosting agreement, of which $1.4 billion is ownership obligations, in exchange for warrants representing 5.4% equity. This is one of the most obvious signals of the blurring lines between crypto mining and AI to date.

IREN completed a $1 billion convertible bond issuance on Wednesday, and TeraWulf announced plans this week to issue $3.2 billion in preferred proposals for its Lake Mariner data center previously located in Buck, New York. Singapore-based Bitdeer Technologies detailed its plan to convert its main mining sites into AI data centers on Wednesday, including its 570-megawatt facility in Clarendon, Ohio. The company stated that under optimal conditions, a full transformation could generate over $2 billion in annualized revenue by the end of 2026.

Needham's Todaro pointed out:

“The revenue per megawatt and EBITDA profit margin for HPC and AI hosting is far higher than mining, and the capital markets are rewarding AI-focused data centers at multiples far greater than traditional mining companies.”

Immediate Power Supply: The Core Competitiveness of Mining Companies

The biggest advantage of Bitcoin mining sites over newly built data centers is time. A Morgan Stanley report indicates that these mining sites have approved grid connections and large-scale power supply capabilities, allowing them to bypass the "heavy load interconnection" process that typically takes years for new data centers to operate Data shows that in addition to the existing 6.3 gigawatts of operational capacity and 2.5 gigawatts of capacity under construction, U.S. Bitcoin mining companies have 8.6 gigawatts of development projects that have obtained grid access permits. The construction period for transforming these sites into AI data centers is approximately 18 to 24 months, perfectly aligning with the time it takes for Bitcoin sites to develop and improve their power infrastructure.

In the context of a sudden power shortage, this ability to "immediately supply power" is crucial. According to the Morgan Stanley model, even considering all innovative measures such as natural gas turbines, fuel cells, and nuclear energy utilization, U.S. data center developers will still face a power shortfall of about 5 to 15 gigawatts by 2028. A report by Schneider Electric confirms that "accessing power" has become an urgent reason for delays in data center projects.

Deteriorating Mining Economics Accelerates Transformation

The urgency for Bitcoin mining companies to transform stems from the ongoing deterioration of Bitcoin mining economics. Last year's Bitcoin halving reduced miner rewards from 6.25 Bitcoins to 3.125. Since then, the increase in network growth and transaction volume has been sufficient to squeeze profit margins. According to the Hash Price Index, the earnings metrics for Bitcoin miners are approaching historical lows. Even though Bitcoin recently reached an all-time high, it has barely improved the unit earnings of mining companies.

Zhao from TheMinerMag pointed out that Riot Platforms, IREN, and Bitfarms have indicated that they will not expand their capacity in the near term. Jeff LaBerge, Vice President of Market Capital and Strategy at Bitdeer, stated:

"For Bitdeer, AI/HPC is a complementary alternative to mining."

As the demand for AI power continues to surge and mining companies can provide immediate power supply, the market is rediscovering the true value of these companies as technology infrastructure startups