Emergence of AI in Cryptocurrency Mining
The convergence of cryptocurrency mining and artificial intelligence is leading to unprecedented trading prospects, as evidenced by the recent stock performance of Core Scientific (CORZ). Following rumors of a potential acquisition by AI cloud computing company CoreWeave, shares of the Bitcoin mining firm jumped 33%, closing above $16 on Thursday. Analysts from Cantor Fitzgerald, however, believe this surge is just the beginning. In a recent analysis, they posited that CORZ could reach over $30 per share in an acquisition scenario, nearly doubling its current market value. This optimistic prediction is based on a comprehensive reevaluation of the company’s assets, which positions it not only as a Bitcoin miner but also as a vital provider of infrastructure for AI applications.
Core Scientific’s Valuation Insights
Central to Cantor Fitzgerald’s argument is a significant 12-year, $3.5 billion agreement between Core Scientific and CoreWeave, signed earlier in 2024. This contract obligates CORZ to deliver 200 megawatts (MW) of power for AI and high-performance computing (HPC) tasks. Their analysis suggests that this reliable, long-term cash flow could be valued at approximately $24 per share, based on a conservative profit multiple of 15 times, which is typical for data center real estate investment trusts (REITs). Additionally, Cantor adds $11.70 per share for the replacement value of Core Scientific’s extensive 570MW of power infrastructure. This assessment sharply contrasts with a failed $5.75 per share offer from CoreWeave in 2024, underscoring how the burgeoning AI sector has significantly altered the valuation of Bitcoin mining assets.
Transitioning from Bitcoin Mining to AI Computing
This strategic evolution is not exclusive to Core Scientific. A report from fintech and AI research outfit Rittenhouse Research in May highlighted that many innovative crypto firms are shifting their focus away from solely Bitcoin mining. They argue that the extensive, power-intensive infrastructures originally built for mining Bitcoin are now more valuable when repurposed for processing AI algorithms. The rationale is based on revenue predictability; AI contracts offer stable, long-term cash flows that shield companies from the extreme volatility inherent in cryptocurrency markets and the revenue fluctuations tied to Bitcoin’s four-year halving cycle. As the overall cryptocurrency market displayed weakness—with BTCUSDT declining 1.77% to $105,534.44 and ETHUSDT falling 4.04% to $2,396.98—the benefits of this stable revenue model become increasingly apparent. This strategic pivot also addresses a significant technological challenge for miners: the diminishing returns from advancements in silicon technology make it harder to create chips that efficiently counteract the halving’s effects.
HIVE Digital’s Aspirations in AI
In alignment with this trend, HIVE Digital Technologies (HIVE) has recently revealed its plans to acquire a 7.2 MW data center located in Toronto, Canada. HIVE intends to develop this facility into a Tier 3 data center for its subsidiary, BUZZ HPC, which will be capable of hosting up to 5,000 state-of-the-art, liquid-cooled GPUs. This initiative is specifically designed to meet the rising demand for AI model training and inference. Craig Tavares, president of BUZZ HPC, highlighted the strategic significance of establishing a “sovereign AI data center” to uphold Canadian data residency and security. This move reflects a broader global trend where countries are vying to build their own domestic AI infrastructures. For HIVE, which originally focused on cryptocurrency mining, this marks a pivotal shift towards becoming a diversified AI and cloud services provider, creating a new narrative for investors that is less reliant on daily fluctuations in cryptocurrency prices.
The Risks and Rewards of the AI Transition
While the pivot toward AI is proving beneficial for companies like CORZ and HIVE, it is not without risks. Bit Digital experienced a 15% drop in its stock price after announcing its transition from Bitcoin mining to Ethereum staking. Similarly, hardware manufacturer Canaan closed its AI chip division after struggling to gain traction in the market, resulting in a nearly 75% decline in its stock over the past six months. The successes of Core Scientific and HIVE suggest that the most promising approach may involve utilizing existing physical infrastructure—such as data centers and power agreements—to meet the growing demands of the AI sector. This creates an intriguing dynamic for traders: while the digital asset market, including pairings like SOLBTC and ADABTC, faces challenges, the physical infrastructure that once fueled it is finding a new, potentially more profitable purpose.
