# NEW

Is AI Transformation the Answer to Crypto Mining Companies?

Bitcoin Mining Companies

KEYTAKEAWAYS

  • Core Scientific's transition to AI services led to significant stock price growth and new revenue streams.
  • CoreWeave successfully transformed from a crypto miner to a leading AI cloud service provider, attracting major clients and substantial funding.
  • Marathon Digital Holdings chose to focus on optimizing mining operations instead of pivoting to AI, resulting in modest growth compared to AI-focused competitors.

CONTENT

Crypto mining companies face challenges post-Bitcoin halving. Some pivot to AI, leveraging existing infrastructure for success, while others optimize mining operations.

 

CURRENT SITUATION OF CRYPTO MINING COMPANIES

 

On July 5th, as BTC fell below $54,000, many mining companies’ machines reached their shut down price. F2Pool data shows that only five types of mining machines can currently bring profits to their operators, indicating that companies primarily engaged in crypto mining urgently need to find new profit points.

 

 

Previously, due to factors such as:

 

  • The consensus mechanism changing from PoW to PoS
  • Bitcoin’s fourth halving
  • Rising energy costs

 

The stocks of leading listed mining companies all plummeted before the halving, with some even declaring bankruptcy. Now, with Bitcoin prices falling, mining operations are finding it even harder to cover costs.

 

Faced with this crisis, mining companies have begun to seek self-rescue. Standard operations include:

 

  • Joining forces
  • Upgrading mining machines
  • Increasing computing power

 

However, the most effective method so far has been transitioning to the AI field. Compared to companies in other industries, mining companies’ business paths highly overlap with the artificial intelligence track, both having a strong demand for computing power, which happens to be the strength of crypto mining companies.

 

CRYPTO MINING COMPANY 1: CORE SCIENTIFIC

 

In January 2024, the company’s Chapter 11 bankruptcy reorganization plan was approved, but its stock fell 30% on the first trading day. By March, Core Scientific reported a 22% decrease in 2023 fiscal year revenue, signaling a need for change.

 

The company’s pivot to AI began with a multi-year contract with CoreWeave, potentially worth over $100 million. Core Scientific leased a Tier III data center in Austin for HPC hosting and soon after announced a 12-year contract with CoreWeave, expecting $290 million in average annual revenue.

 

The shift towards AI also brought Core Scientific newfound confidence and renewal. Not only did they reject CoreWeave’s offer to acquire the mining company at $5.75 per share, but the company’s market value also achieved positive growth as the stock price rose.

 

Bitcoin Mining Companies

(source: Investing.com)

 

As seen in the chart above, Core Scientific’s stock price was about $3 before the halving, but has since risen steadily, currently reaching $10, an increase of nearly 300%. Notably, after Core Scientific announced the 12-year contract with CoreWeave in June, its stock price doubled.

 

CRYPTO MINING COMPANY 2: COREWEAVE

 

CoreWeave started out in mining but is now known as the “AI computing power scalper.” Founded in 2017, it’s a specialized cloud provider with large-scale GPU computing resources, owning thousands of NVIDIA graphics cards.

 

CoreWeave was initially a mining company focused on Ethereum. By late 2018, they had deployed over 50,000 GPUs, accounting for more than 1% of the Ethereum network’s computing power, becoming North America’s largest Ethereum miner.

 

Recognizing the increasing competition in crypto mining and the impact of electricity costs, CoreWeave shifted its focus in 2019. The company began investing in enterprise-grade GPU chipsets and building dedicated cloud infrastructure centered around NVIDIA’s chips.

 

This strategic move positioned CoreWeave to capitalize on the global AI trend. By leveraging NVIDIA graphics cards, CoreWeave transformed into a leading cloud computing service provider, attracting major clients like Microsoft and Google. The company now ranks among the world’s largest independent GPU cloud providers, serving diverse industries including VFX, AI, gaming, and healthcare.

 

CoreWeave’s transformation has yielded significant financial success. In 2023, the company secured $421 million in Series B funding, followed by a $2.3 billion debt financing round that boosted its valuation to $8 billion. This year, CoreWeave completed a $1.1 billion Series C funding round and announced plans to invest $2.2 billion in European data centers by 2025.

 

Currently, there are market rumors that CoreWeave plans to go public in 2025.

 

CRYPTO MINING COMPANY 3: MARATHON DIGITAL HOLDINGS

 

Marathon Digital Holdings is the largest listed Bitcoin mining company. According to Bitcoin Treasuries, Marathon Digital holds over 17,000 bitcoins.

 

Rather than pivoting to AI, the company aims to double its computing power to 50 EH/s by the end of 2024. To achieve this, Marathon Digital has implemented several strategies:

 

  1. Acquired a Bitcoin mining data center from Applied Digital Corporation for $87.3 million.
  2. Partnered with NiceHash to develop custom firmware for Bitcoin ASIC miners.
  3. Introduced new mining products like MARAFW firmware and MARA UCB2100 control board to enhance miner efficiency.

 

Marathon Digital is also diversifying its approach by launching Anduro, a Bitcoin sidechain and development platform, and investing over $80 million in Kenya’s energy infrastructure.

 

In the first quarter of 2024, Marathon Digital mined 2,811 bitcoins, worth approximately $176 million. This performance was attributed to a 15% increase in operational computing power and rising Bitcoin prices. Despite these efforts, Marathon Digital’s stock price has seen only modest growth, rising from about $15 to $21 around the Bitcoin halving event.

 

CONCLUSION

 

Early adopters of AI among mining companies have seen substantial gains, often escaping crypto market volatility. Those sticking to traditional mining may struggle as the next halving nears. For mining companies, transitioning to AI could be ideal, leveraging their existing infrastructure, expertise, and resources to ease the shift into this new sector.

 

 

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