Bitcoin miners have significant potential for upside from the power portfolios they control, as highlighted in a recent research report by broker Bernstein. The report suggests that miners who adopt an active power strategy and maximize power efficiency are more likely to see a valuation rerating. Analysts led by Gautam Chhugani suggest that investors could benefit by valuing these companies as efficient power shells with data center capabilities rather than merely bitcoin mining operations. Currently, miners trade at about a 90% discount to general data center valuations.
The bitcoin mining sector has seen a rerating recently, particularly after Core Scientific signed a 12-year artificial intelligence (AI) deal with cloud computing firm CoreWeave. The market is considering the potential AI and high-performance computing (HPC) opportunities, as well as the upside from alternative and more accretive uses for bitcoin mining sites. Large miners are still focused on increasing bitcoin production and their respective hashrates, with Riot Platforms, CleanSpark, and Iris Energy best positioned to expand their market share.
There is also potential for improving power efficiency and uptime. Miners can enhance their hashrate by upgrading their hardware to the latest generations of ASICs. Hashrate, a measure of computing power, indicates competition in the industry and mining difficulty. Iris Energy and CleanSpark rate well in terms of power efficiency and uptime, while Core Scientific ranks highly regarding data center uptime. Riot’s efficiency is expected to improve as it energizes its large power sites, and Marathon Digital’s efficiency should recover as it builds out its self-mining portfolio.
Customization and innovation in mining systems and software can further enhance efficiency, according to the report. Bernstein has an outperform rating on CleanSpark, Core Scientific, Iris Energy, and Riot Platforms, and a market perform rating on Marathon Digital.
