How Analysts Assess Bitcoin Miners' Turn to AI and Chip Manufacturing
Those watching Bitcoin miner earnings in Q4 might conclude that things were going well for the sector.
However, it is important to remember that, according to a new report from JP Morgan, public Bitcoin miners have lost $23 billion in combined market capitalization over the past month.
This is not particularly surprising given that Bitcoin's price topped $102,000 in early February before falling to $78,000 amid President Donald Trump's trade war talk.
Market analysts told Decrypt that in addition to expecting Bitcoin to rise in value, they are also keeping an eye on data center transactions, energy costs, and how miners are improving the efficiency of their equipment.
Earlier this week, Hut 8 announced revenue of $162.4 million for 2024, up 69% from 2023. However, that's not what Mike Colonnese, managing director and senior crypto analyst at HC Wainwright, is optimistic about.
“We believe Hut 8 is close to closing a major HPC/AI deal with a hyperscaler,” he told Decrypt . “The company will build and operate an HPC/AI data center for the customer on a colocation model, where Hut will earn long-term, high-margin revenues from the tenant for managing the infrastructure where that tenant’s GPUs are deployed to run AI workloads.”
In addition to this, the company also reported a 30% reduction in energy costs in its report. This allowed it to increase its gross profit per bitcoin mined by 8 points compared to the fourth quarter of 2024 compared to the previous year.
This is a difficult task, given that the Bitcoin network experienced its fourth halving that same year, which cut the block rewards received by miners in half.
Overall, Colonnese said he believes mining costs will increase in 2025 as network difficulty continues to increase along with hashrate growth, and significant upgrades to the most popular mining rigs are not expected anytime soon.
“However, I believe that the growth in the price of BTC will outpace the increase in difficulty,” he added, “so miners will be able to benefit from a significant improvement in mining economics in 2025.”
Nishant Sharma agrees that it is important to look at how miners manage their expenses, but uses a term he calls hashcost, which is a measurement of the efficiency of a miner's fleet and the funds required to run Bitcoin mining hardware.
Sharma, who previously worked at major Bitcoin mining company Bitmain, is the founder of mining research and communications firm Blocksbridge Capital.
“This gives a clearer picture of how profitable a company is at mining bitcoin,” he told Decrypt . “However, when evaluating a mining stock, investors should consider more than just the efficiency of the mining process itself.”
He stressed that most mining companies, like Hut 8, have already diversified their revenue streams by offering data center space to AI and high-performance computing (HPC) clients. But that’s not the only way forward.
Other companies, such as Core Scientific, are developing their own ASIC chip. “These strategic moves introduce additional considerations that investors should consider depending on their investment thesis and outlook,” he added.
An ASIC, or application-specific integrated circuit, is a key chip that optimizes hardware specifically for cryptocurrency mining. This makes mining rigs significantly more efficient than mining cryptocurrency on personal computers.
In 2024, Core Scientific announced it would team up with Jack Dorsey's Block Inc. to develop ASIC chips. Investors will soon be able to see these chips in action.
“We do not expect to increase or upgrade our Bitcoin mining fleet until we purchase new Block ASIC chips in the second half of 2025,” Denise Sterling, Core Scientific’s CFO, said on the company’s recent earnings call.
Core Scientific's earnings report was largely unremarkable, according to Max Shannon, an analyst at crypto investment firm CoinShares.
“In the mining space, performance was lackluster and actually deteriorated somewhat,” he told Decrypt . “However, the high-performance computing (HPC) segment performed well, generating significant interest from customers.”
He was referring to Core Scientific's deal with AI hyperscaler CoreWeave, which announced a $1.7 billion deal earlier this week. Last month, the two companies completed a $1.2 billion expansion at a Texas data center.
He also keeps an eye on Bitdeer, another Bitcoin miner that is actively developing the production aspect. Its SEALminer A2 rigs have already captured about 5% of the market based on projected future hashrate growth, he noted.
“We believe that this share can increase further over time,” Shannon added. “This segment provides greater operational flexibility as the company can use the machines at cost rather than purchase them at market price.”
Source: cryptonews.net
