- More and more crypto mining companies are diversifying into AI.
- This transition could create great buying opportunities in publically listed Bitcoin mining stocks.
- In this article, we'll take a look at stocks that may be posed to benefit the most from this pivot.
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The crypto-currency mining sector is undergoing a major transformation, with Bitcoin miners increasingly diversifying into the artificial intelligence (AI) and high-performance computing (HPC) sectors.
Faced with increasing pressures such as rising energy costs, regulatory scrutiny, and market volatility, mining companies are exploring new revenue streams to sustain and grow their businesses.
Bitcoin mining has always been an energy-intensive process, requiring considerable computing power to solve complex mathematical problems.
Soaring energy prices and heightened environmental concerns have put miners in the spotlight. In addition, cryptocurrencies' volatility adds a new layer of financial uncertainty, making profitability a moving target.
Regulators around the world are also tightening their grip on crypto-currency activities.
Stricter compliance requirements and potential legal hurdles are making the mining landscape even more challenging. The combination of these factors has prompted miners to reassess their business models.
Transition to AI Radically Changes the Outlook for Crypto-Mining Companies
Artificial intelligence and machine learning applications require significant computing resources, as does cryptocurrency mining.
Recognizing this, many mining companies are reallocating their existing infrastructure to AI. This pivot enables them to leverage their high-performance hardware for tasks such as data analysis, natural language processing, and image recognition.
In other words, crypto mining stocks, once primarily approached as proxies for investing in digital assets via the stock market, are changing their profile altogether.
Some crypto mining companies are indeed set to become vital links in the AI industry, which could significantly enhance their long-term prospects.
Which Stocks Are Leading the Charge?
Mining companies that have already officially established AI and/or HPC capabilities include Bit Digital Inc (NASDAQ:BTBT), Core Scientific Inc (NASDAQ:CORZ), HIVE Blockchain (TSXV:HIVE) Technologies Ltd (NASDAQ:HIVE), Hut 8 (TSX:HUT) Corp (NASDAQ:HUT) and Iris Energy Ltd (NASDAQ:IREN).
We turned to InvestingPro to take a quick look at these stocks to determine which might represent the best opportunities. To do this, we put them together in an advanced watchlist configured to display the following criteria:
Source : InvestingPro
First and foremost, the only stock on the list considered a bargain by InvestingPro Fair Value and analysts is Hive Blockchain. Indeed, the Fair Value assigns it a bullish potential of 80.1%, while analysts envisage a gain of 85.2% for the stock.
However, it's also the worst-performing stock on the list over a one-month horizon and the only one with a below-average InvestingPro Health Score (2.39/5).
As for the other stocks on the list, Fair Value reflects a downside risk for each of them.
However, Fair Value is based on valuation models, which are themselves based on cash flows. By definition, therefore, they cannot take into account the potential linked to the transition of crypto miners to AI-related activities.
As for analysts, who are more inclined to take into account BTC miners' change of business model, they consider Iris Energy and Bit Digital to be "bargains", assigning them a bullish potential of +63.2% and +71.4% respectively.
Hut 8 and Core Scientific, meanwhile, are considered "undervalued", with bullish potentials of 25.7% and 29.6% respectively.
Conclusion
Bitcoin miners' shift to artificial intelligence and high-performance computing is a strategic response to the multiple challenges facing the cryptocurrency mining sector.
By leveraging their existing resources and exploring new avenues, these companies aim to secure a prominent place in the AI industry.
Much remains to be done, but this year is undoubtedly an important turning point for the industry, and in this context, stocks such as Hive Blockchain, Iris Energy, and Bit Digital deserve their place on investors' radar.
As you look to take advantage of the potential rally in Bitcoin mining stocks, InvestingPro's tools can prove invaluable in picking future winners.
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Disclaimer: This article is written for informational purposes only. It is not intended to encourage the purchase of assets in any way, nor does it constitute a solicitation, offer, recommendation or suggestion to invest. I would like to remind you that all assets are evaluated from multiple perspectives and are highly risky, so any investment decision and the associated risk is at the investor's own risk. We also do not provide any investment advisory services. We will never contact you to offer investment or advisory services.