Bernstein says Bitcoin mining deals necessary for AI power crunch

Investment manager Bernstein maintains a positive outlook on the Bitcoin mining sector, emphasizing the increasing number of partnerships between Bitcoin mining companies and AI data centers as essential to overcoming power supply challenges faced by the AI industry. According to Bernstein’s research note, Bitcoin mining firms secured over 7.5 gigawatts of combined power through multi-year contracts in July alone, equating to about $150 billion in deal value. These deals reflect the critical role of third-party computing capacity from Bitcoin miners amid escalating political resistance to building new AI data centers in the United States.

Bitcoin mining stocks reacted positively to recent announcements of major AI infrastructure deals. Hut 8 revealed a 15-year, $9.8 billion lease for its AI data center campus, while IREN disclosed $2.8 billion in cloud services contracts with AI developers. A market analyst from Seeking Alpha highlighted IREN’s move to convert its infrastructure into contracted and more predictable revenues, while noting execution risk as the primary concern but rating the stock as a strong buy. Other miners expanding into AI include MARA Holdings, planning a 2-gigawatt site in Texas, and TeraWulf, which signed a 20-year data center lease with AI firm Anthropic potentially worth $19 billion.

Bernstein’s report further points out that AI data centers face increasing political hurdles due to their substantial power and water usage demands. Proposals like those from Texas Senate candidate James Talarico aim to enforce stricter approvals and repeal tax incentives for AI data center development. U.S. Senator Ron Wyden has raised concerns about water scarcity linked to large AI data centers in Oregon. Various state and federal officials have pushed for the expansion of power grids to support AI infrastructure growth but insist that costs should be borne by new data center developments rather than existing residential customers.

The significance of these developments, as highlighted by Bernstein, lies in Bitcoin miners’ ability to provide much-needed computing power without the political and environmental complications accompanying new data center construction. This positioning potentially offers Bitcoin mining companies a strategic advantage in the AI infrastructure market going forward. Bernstein assigns outperform ratings to most Bitcoin mining stocks involved in AI deals, underscoring their expected continued growth and importance in this space.