By turning to artificial intelligence (AI), Bitcoin miners could unlock significant new revenue streams, potentially increasing annual profits to nearly $14 billion by 2027.
This prediction comes from VanEck’s head of digital assets research, Matthew Sigel, and digital assets investment analyst Nathan Frankovitz, who discussed the potential synergy between Bitcoin mining and artificial intelligence in a recent blog post.
“The synergy is simple: AI companies need energy, and Bitcoin miners have that energy,” Sigerl says.
According to their analysis, if the 12 largest publicly traded Bitcoin miners dedicated 20% of their energy capacity to AI computing, their average annual profits could rise to $14 billion. This prediction stands in stark contrast to the $335 million losses that Bitcoin miners collectively suffered last year.
Bitcoin mining is a highly competitive industry where miners invest a large amount of computing power to secure the Bitcoin blockchain and are rewarded with newly mined Bitcoin. However, this business model leaves them vulnerable to cryptocurrency price fluctuations. High prices can lead to significant profits, while lows can lead to major losses.
To mitigate these risks, some mining companies, such as Hut 8 and HIVE, have already begun diversifying by directing some of their resources toward AI applications. VanEck argues that Bitcoin miners have a significant advantage in this area, as they already have the infrastructure needed to transition to AI, whereas AI companies may need several years to build new facilities.
Bitcoin miners are trading at around $4.5 million per megawatt of installed capacity, while data center stocks are valued as high as $30 million per megawatt, suggesting a lucrative potential for miners to enter the AI space.
Competition for computing power is so intense that big tech firms could soon target Bitcoin miners for acquisitions. Brian Dixon, CEO of crypto hedge fund Off The Chain Capital, believes that tech giants like Amazon and Google could find it more efficient to buy Bitcoin miners’ AI networks than to build new data centers. “We could see some of them start buying mining companies outright,” Dixon said, noting that the demand for AI processing power leaves companies with few other options.
But not everyone is convinced that going AI is the right move for Bitcoin miners. Elliot Chun, a partner at crypto finance strategy firm Architect Partners, argues that Bitcoin miners could be making a strategic mistake by going AI. The two business models are fundamentally different, and the operational requirements of AI, such as near-perfect uptime, are not something Bitcoin miners are accustomed to managing, Chun said.
*This is not investment advice.