Wall Street’s publicly traded Bitcoin (BTC) mining companies are exploring new ways to generate revenue, with a focus on high-performance computing (HPC) and artificial intelligence (AI), according to a recent analysis from asset manager VanEck.

Bitcoin miners look to AI and high-performance computing for higher revenue

The shift comes as miners seek to diversify their operations and capitalize on the growing demand for computing power in the AI ​​sector. Matthew Sigel, head of Digital Assets Research at VanEck, estimates that this strategic shift could unlock $38 billion in value for mining companies by 2027.

“AI companies need power, and bitcoin miners need it,” Sigel said. “As the market values ​​the growing AI/HPC data center market, access to power — especially in the short term — is at a premium.”

The synergy between Bitcoin mining and AI computing stems from miners’ access to abundant energy resources and existing data center infrastructure. As AI development intensifies, the demand for energy-intensive computing facilities has increased dramatically, creating a natural fit for mining operations looking to diversify.

“Many miners are leaning toward the complementary strategies that Bitcoin & AI/HPC offer,” Sigel added. “In the May 2024 update, Iris Energy noted that cloud services help optimize capital costs and diversify revenue streams, streamlining returns through the Bitcoin cycle.”

Bitcoin Miners Are Turning to AI and HPC, Unlocking New Revenue Through Strategic ArbitrageWe estimate a net present value of $38 billion by converting 20% ​​of their collective capacity by 2027. (For comparison, the combined market cap of the stocks we looked at is $19 billion.)🧵 photo.twitter.com/hudE7PbXH2

— matthew sigel, recovering CFA (@matthew_sigel) August 16, 2024

Examples of such moves have been evident since last year. For example, HIVE Blockchain rebranded as HIVE Digital to better reflect the changing nature of its business, which is now focused not only on BTC mining but also on supporting the HPC and AI industries. The company expects this new venture to double its revenues, and to that end, it has announced the construction of a new hydroelectric data center.

Don’t miss the market opportunity, says VanEck

Despite the optimistic outlook, recent market trends have shown a divergence between the performance of Bitcoin and mining stocks. The MarketVector Digital Asset Equity Index, which tracks major players in the digital asset space, has significantly underperformed Bitcoin so far this year. This discrepancy suggests that investors are overlooking the potential benefits of miners’ diversification strategies.

However, after the recent correction, the MarketVector Digital Asset Equity Index, which tracks these stocks, has been flat so far this year, underperforming the bitcoin price by 3,800 basis points. photo.twitter.com/0lBMH1IAad

— matthew sigel, recovering CFA (@matthew_sigel) August 16, 2024

VanEck notes that while Bitcoin mining remains the core business for these companies, the ability to move to AI and HPC could insulate them from the volatility of the crypto market and create more stable revenue streams.

“While the miner AI/HPC trend is still in its infancy, it represents a significant merger of two rapidly growing tech sectors, creating a fascinating game theory dynamic,” Sigel concluded. “If some miners go offline to run GPUs, Bitcoin’s difficulty algorithm will automatically adjust, allowing the remaining miners to capture a slightly larger market share.”

While cryptocurrencies still account for the majority of revenue for Wall Street’s largest miner, Hive Digital, HPC generated $2.6 million in Q2 and those numbers are expected to continue to rise.

This article was written by Damian Chmiel on www.financemagnates.com.