Janice R. Andrews
Artificial intelligence is currently one of the most exciting potential in the tech industry (AI). The fact that almost every business in the modern era is attempting to establish itself as an AI stock is not surprising. This movement also extends to Bitcoin miners, some of whom are already trying to rebrand in order to take advantage of the emerging AI market. Core Scientific (NASDAQ: CORZ), which upended the Bitcoin mining sector at the start of June with a $3.5 billion AI computing purchase, is the poster child for this move into AI. Core Scientific’s stock price surged when the purchase was revealed, and it has now increased by more than 190% this year.
The Bitcoin Miners’ AI Opportunity
While there is much to explore here, the essence of it all is processing power. The massive processing power needed for AI is precisely what Bitcoin mining businesses can provide. It turns out that they have powerful Bitcoin mining rigs that can be used for AI computation, opening up a big new market. To put it all together, Bitcoin mining facilities are about to become AI GPU hosting centres.
For months, Wall Street analysts have discussed a possible shift to artificial intelligence (AI), and now Core Scientific is bringing that vision to fruition. Early in June, the business agreed to a 12-year contract for high-performance computing (HPC) capability from AI cloud provider CoreWeave. According to Core Scientific, the total revenue from this agreement might reach $3.5 billion throughout the course of the contract.
Any more money will be much welcomed by Bitcoin miners. Because the Bitcoin mining market is so cyclical, miners must a reliable source of income in order to survive difficult times. This stability is meant to be provided by AI. Core Scientific filed for bankruptcy protection just two years ago, after the collapse of the Bitcoin price, and it emerged from the bankruptcy restructuring process in January.
Possible Effect on Bitcoin Miners’ Valuation
The potential for AI might be enormous. For instance, JPMorgan recently estimated that the 14 Bitcoin miners it covers had already benefited from the AI computing possibility to the tune of $4 billion in total value.
For the straightforward reason that AI companies are faced with the traditional build-or-buy dilemma, this AI possibility is appealing to investors as well as companies. They have the option to purchase AI computer centres from another company or construct their own. Five years is the average build time, according to JPMorgan. So, instead of waiting five years, there is a lot of interest in being able to launch an AI project very instantly.
As an example, after announcing that it had signed a deal with Core Scientific for AI computing, CoreWeave immediately made an offer to purchase the entire business. Discuss whether to buy or build! For its part, Core Scientific essentially replied, “Thanks, but no thanks, we’re worth more than what you’re offering today.”
What Future Investments Should See
For Bitcoin miners so far in 2024, things have been uneven. While the value of Core Scientific has surged, that of other Bitcoin miners has not. In reality, Riot Platforms and other Bitcoin miners that reported triple-digit profits the previous year are currently losing money for the first half of the year.
It seems that investors are rewarding businesses that have taken use of AI. Riot Platforms has, as JPMorgan notes, strangely refrained from joining the AI bandwagon. Simply noted, other Bitcoin mining businesses lack the appropriate mining equipment that are easily adaptable to AI computing.
That being said, bear in mind that not all companies that you consider investing in Bitcoin mining stocks are made equal. Pay attention to Bitcoin mining firms that are actually closing agreements and making money, not simply those who are speculating about the possibility of the AI industry. For this reason, in the second part of the year, Core Scientific may actually have a chance to go parabolic. Its stock price might rise even further if it closes another well-known deal in the upcoming months.
For Bitcoin miners, the shift to AI offers a sizable opportunity as it may create a new source of income that would help to stabilise profits during market downturns. This trend is highlighted by Core Scientific’s recent $3.5 billion purchase for AI computing, which establishes the company as a leader in the AI hosting industry. Businesses like Core Scientific that have accepted this change may enjoy significant improvements in stock price as artificial intelligence (AI) develops and the demand for processing power rises. Investors want to keep a careful eye on advancements in this area, paying particular attention to companies who have tangible AI plans and contracts that generate actual income.
