The AI gamble of mining companies: Valuations enter a phase of differentiation, and it's hard to turn the tide

Author: Nancy, PANews

The continuous downturn of crypto assets has put increasing survival pressure on crypto mining companies. In search of new growth curves, more and more mining companies are accelerating their entry into the AI sector. This transformation narrative has quickly gained favor in the capital markets, with many mining companies seeing significant stock price increases, even reaching historical highs.

However, while the AI business injects new growth imagination into mining companies, the enormous capital expenditures, ongoing funding investments, and long return cycles are pushing mining companies into another battle of capital consumption. As the profitability of mining operations continues to be under pressure, this gamble on transitioning to AI is testing the financial strength and execution capabilities of mining companies.

Stock Prices Significantly Outperform Bitcoin, Mining Company Valuations Enter Differentiation Stage

Mining companies are transforming into the power landlords of the AI era.

As the profitability of Bitcoin mining continues to narrow, some mining companies have even fallen into losses, while the explosion of AI has driven a sharp increase in global demand for data centers, power resources, and GPU computing power. More and more mining companies are beginning to accelerate their transition to the AI infrastructure sector in search of new growth curves.

For mining companies, this transformation has inherent advantages. For a long time, to meet the demands of large-scale mining, mining companies have mastered key assets such as abundant power resources, land reserves, substation access capabilities, and mature heat dissipation and cooling systems. Compared to data center operators who start from scratch, mining companies only need to upgrade their existing facilities to quickly enter the AI infrastructure market, taking on AI computing power demands at lower costs and shorter timelines.

Since last year, the pace of mining companies transitioning to AI has noticeably accelerated. Some miners have decisively downplayed or even exited traditional mining operations, fully turning to AI computing power and data center operations; others have retained some mining machine operations but gradually shifted their resource allocation and capital expenditure focus to the AI field. Now, several mining companies have grown into important participants in AI infrastructure construction.

From the perspective of transformation timing, companies like CoreWeave, Applied Digital, and Bitdeer began laying out AI computing power and data center businesses as early as 2022 to 2023, making them early transformers in the industry; while companies like Iris Energy, Terawulf, Hut 8, Riot Platforms, and Bitfarms began to significantly ramp up AI infrastructure construction in 2025, coinciding with the rapid expansion cycle of the AI industry.

From stock performance, the market has given a high recognition to the narrative of mining companies' AI transformation. The average increase in stock prices of 11 mining companies has reached 75.97% since the beginning of the year, significantly outperforming Bitcoin during the same period, with most achieving new highs after the transformation. Among them, Bitfarms (129.62%), Hut 8 (131.87%), Terawulf (118.68%), and Riot Platforms (93.71%) have performed particularly well, benefiting from this round of AI infrastructure revaluation.

From a market capitalization perspective, mining companies have shown significant differentiation. As a representative of successful transformation, CoreWeave's market capitalization has reached $62.855 billion, far exceeding other mining companies and becoming a new valuation benchmark in the industry; Iris Energy, Terawulf, Hut 8, Applied Digital, and Riot Platforms have formed a market capitalization tier of $10 billion to $20 billion; while companies like MARA Holdings, Core Scientific, Bitdeer, CleanSpark, and Bitfarms remain below the $5 billion range. This differentiation stems not only from first-mover advantages but also from the market's differentiated pricing based on each mining company's AI strategic execution capabilities, customer resources, and data center deployment progress.

However, from a fundamental perspective, most mining companies are still in the heavy investment phase of AI transformation. Although many mining companies' latest quarterly reports show revenue growth, overall profitability remains under pressure. On one hand, the value fluctuations of crypto asset investment portfolios drag down profit performance; on the other hand, AI data center construction requires enormous capital expenditures, with increasing investments in power expansion, infrastructure construction, and GPU equipment procurement, driving operational costs higher and causing most mining companies to remain in a loss state.

It is worth noting that despite the generally pressured performance, the stock prices of related mining companies have still seen significant increases, indicating that the current market focus is not on short-term profitability but rather on the growth potential of mining companies as new-generation computing power infrastructure operators.

The Survival Battle of Mining Companies Intensifies, AI Transformation Still Needs to Overcome Multiple Challenges

The sluggish Bitcoin market is making the survival environment for mining companies increasingly severe.

Capriole Investments data shows that as of June 18, the average production cost of Bitcoin is approximately $63,707, with electricity costs around $50,965, resulting in a miner profit margin of only 17.45%. Over the past 30 days, the miner profit margin has contracted by 47.8%. Meanwhile, the Luxor Hashrate Index also indicates that as of June 18, the daily return for 1 TH/s computing power has dropped to $0.032, a significant decline from $0.053 during the same period last year.

With mining revenues continuously shrinking, many mining companies have had to sell Bitcoin to maintain cash flow, further intensifying the survival pressure on small and medium-sized mining companies, with mining resources accelerating towards leading players. Currently, the three major mining pools, Foundry USA, AntPool, and F2Pool, collectively account for 59% of the total network computing power market share. In comparison, in 2022, the top three Bitcoin mining pools only accounted for 44% of the computing power market share.

Although traditional mining operations are struggling, the explosive growth in demand for AI data centers is prompting the market to reassess the value of mining companies. VanEck's latest research report points out that the most valuable assets for mining companies are not mining machines, but rather power resources, substation access capabilities, land reserves, and data center infrastructure, which are precisely the core resources most scarce in the current AI industry. Since AI clients are willing to pay much higher electricity prices and rents than traditional mining operations, AI infrastructure is expected to become the main growth engine for mining companies over the next decade.

According to a report from research firm Bernstein, large-scale cloud vendors, AI cloud service providers, and chip companies have announced over $90 billion in AI infrastructure collaborations, involving approximately 3.7 GW of power capacity. Currently, the competition for power resources is becoming the core of AI infrastructure competition, with Bitcoin mining companies collectively controlling over 27 GW of planned power capacity. In some areas of the United States, the access period for new 1 GW power can take up to 50 months, making existing mining sites important locations for the expansion of AI data centers.

However, the transition to AI is far from an easy path. VanEck states that the current market is still in the early stages of AI transformation, with corporate valuations primarily measured based on Gross Energized Power. Mining companies that have signed AI leases generally receive higher valuation premiums, while projects that remain in the planning stage struggle to gain market recognition. In the future, industry valuation logic will gradually shift from "power capacity" to "project delivery capability," ultimately returning to core indicators such as cash flow, capital return rates, and tenant quality. Currently, the industry has only completed about 25% of the contracted capacity delivery, and whether AI data center construction can be completed on time and within budget will be a key factor determining corporate valuations.

VanEck also emphasizes that the quality of AI tenants will directly impact the valuation levels of mining companies. Clients from large-scale cloud vendors like Microsoft, Amazon, and Google can bring more stable cash flows and lower financing costs, while smaller GPU cloud service providers correspond to higher operational risks and capital costs.

The enormous capital investment required for the transformation is also testing the financial strength of mining companies. VanEck estimates that mining companies still face significant capital expenditure demands for transitioning to AI infrastructure, with a short-term financing gap of about $50 billion and long-term capital needs potentially reaching $221 billion.

Under immense financial pressure, many mining companies have begun to raise funds through various means. For example, mining companies like Iris Energy, TeraWulf, Bitfarms, and CleanSpark are financing through the issuance of convertible bonds, attracting investors with lower coupon rates and future conversion potential; while companies like Core Scientific, Terawulf, MARA, Bitdeer, and Riot Platforms have chosen to sell or even liquidate part of their Bitcoin reserves to continuously fund their AI transformation.

In addition, many mining companies are starting to lock in future revenues by signing long-term AI or high-performance computing (HPC) contracts, thereby obtaining project financing support and reducing overall operational risks. For instance, CoreWeave has reached a $6 billion AI cloud service cooperation agreement with Jane Street; IREN has secured a $9.7 billion AI cloud computing contract with Microsoft; Hut 8 has signed a total value of $9.8 billion data center leasing agreement; and Bitdeer is collaborating with Norway's DCI to build the country's largest AI data center project.

For mining companies, AI undoubtedly provides a development path with far more imaginative potential than traditional mining operations at this stage. However, this transformation is not simply a switch from mining to selling computing power; it is essentially a long-term competition centered around capital, resources, and execution capabilities.