Bitcoin miners may find better returns in AI than crypto, Novogratz’s Galaxy Digital suggests

Bitcoin miners with the best infrastructure and administration expertise can achieve substantial worth by pivoting into the booming AI and HPC information heart market, analysts say.

As demand for AI infrastructure grows, crypto miners with entry to energy and cooling could possibly be nicely positioned to revenue from supporting high-performance computing workloads, in keeping with a Galaxy Digital research report.

The analysts imagine miners with skilled administration groups able to executing AI and HPC buildouts have a “large alternative” to deliver “vital incremental worth to their corporations.” The attraction lies within the long-term contracts and powerful, regular money move fashions of AI and HPC colocation — described by Galaxy Digital as “predictable and excessive margin money move streams” — a stage of stability that’s usually missing in crypto markets.

“Not solely is income extra predictable than Bitcoin mining, it’s additionally uncorrelated to crypto markets, which smooths income profiles of corporations with excessive publicity to the risky crypto markets. In Bitcoin bear markets, this could improve monetary stability, permitting miners to proceed to lift money by means of fairness or debt with out incurring extreme dilution or curiosity burden.”

Galaxy Digital

Financing choices are additionally increasing. Knowledge heart operators which have a lease in hand with a credit score worthy counterparty “can take that lease and lift substantial sums of venture financing to assemble the information heart,” Galaxy wrote, citing $18 billion in growth financing underwritten in Q1 2024 alone.

The valuation hole is one other key issue, with the report noting that Bitcoin (BTC) miners have sometimes traded at six to 12 occasions their earnings, whereas a number of the world’s largest information heart operators are valued at 20 to 25 occasions earnings.

Nevertheless, not all crypto mining websites are match for the shift, Mike Novogratz’s Galaxy Digital wrote, noting that some might not have the best situations for AI and high-performance computing, even when they nonetheless work nicely for Bitcoin mining.

With U.S. information heart capability anticipated to greater than double by 2030, Galaxy says miners who adapt now might turn out to be “a number of the largest operators within the trade.”