The valuation logic of Bitcoin mining companies is undergoing a fundamental reconstruction. With established access to electric grids, these companies are rapidly transforming into tech infrastructure providers. Their ability to immediately supply power to AI data centers has become a core advantage, helping Bitcoin miners gradually free themselves from the constraints of the cryptocurrency cycle.

On October 19, reports indicated that funds tracking publicly listed mining companies have surged over 150% this year, significantly outperforming Bitcoin's 14% increase. Shares of Cipher Mining and IREN Ltd. skyrocketed by approximately 300% and 500%, respectively. This performance reflects a repricing of these companies by investors, who have shifted focus from mining revenues to the value of their AI infrastructure.

According to John Todaro, an analyst at Needham & Co.:

"Investors are valuing Bitcoin mining companies almost entirely based on the HPC/AI opportunity. In our conversations with miners, discussions about Bitcoin and Bitcoin mining accounted for less than 10%."

This valuation discrepancy arises from a key fact: US Bitcoin miners operate approximately 6.3 gigawatts of existing sites and have 2.5 gigawatts of capacity under construction, making them the quickest and lowest-risk option for AI companies to obtain power. With a significant power shortfall of 45 gigawatts projected for US data centers between 2025 and 2028, the value of these ready power resources becomes increasingly apparent.

The Trading Logic Reconstruction The trading logic is essentially shifting towards "powering AI." Earlier this year, Cipher Mining signed a month-long validation agreement with Fluidstack, partially supported by Google, for a ten-year host management contract valued at around $3 billion, of which $1.4 billion represents ownership obligations in exchange for warrants representing 5.4% equity. This marks one of the clearest signals yet of the blurring lines between crypto mining and AI.

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

Todaro from Needham noted:

"The revenue per megawatt and EBITDA margins for HPC and AI hosting are far superior to mining, and capital markets are rewarding companies focused on AI data centers with multiples significantly higher than traditional miners."

Immediate Power Supply: Core Competitiveness of Miners The primary advantage of Bitcoin mining sites over newly constructed data centers lies in time. Morgan Stanley's report highlights that these mines have pre-approved grid connections and large-scale power supply capabilities, allowing them to bypass the years-long 'high-load interconnection' process typically required for new data centers.

Data shows that in addition to the existing 6.3 gigawatts of operational capacity and 2.5 gigawatts under construction, US Bitcoin miners have an additional 8.6 gigawatts of development projects already granted grid access permits. The construction cycle for converting these sites into AI data centers is roughly 18 to 24 months, perfectly aligning with the timeframe for Bitcoin sites to develop and complete their power facilities.

In a context of acute power shortages, this 'immediate power' capability is critical. Morgan Stanley's model indicates that even with the incorporation of all innovative measures like natural gas turbines, fuel cells, and nuclear energy, US data center developers will still face a power deficit of approximately 5 to 15 gigawatts by 2028. A Schneider Electric survey confirms that "accessing power" has become an urgent reason for project delays in data centers.

Accelerating Transformation Amidst Deteriorating Mining Economics The urgency for Bitcoin miners to transform is driven by the ongoing deterioration of Bitcoin mining economics. Last year's halving cut miner rewards from 6.25 Bitcoins to 3.125. Subsequently, network growth and transaction volumes have been insufficient to sustain margins. The hash price index shows that Bitcoin miners' revenue metrics are nearing historical lows. Even with recent record highs in Bitcoin prices, unit revenues for mining companies have seen little improvement.

Zhao from TheMinerMag noted that Riot Platforms, IREN, and Bitfarms have indicated they will not be expanding capacities in the near term. Jeff LaBerge, Vice President of Market Capital and Strategy at Bitdeer, remarked:

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

Against a backdrop of surging power demand for AI and miners' ability to provide immediate power supply, the market is rediscovering the true value of these companies as technology infrastructure startups.