Shares of Bitcoin miners pivoting to AI infrastructure fell an average of 35% in October, while VanEck believes the market is lumping together companies with access to electricity and rivals expanding with debt.
Shares of companies shifting from Bitcoin mining to the data center business fell sharply in October. According to VanEck, one reason for the sell-off was that investors were evaluating together companies serving the same sector but generating revenue in different ways.
Why were Bitcoin miners lumped together?
Companies such as Hut 8 and Core Scientific lease facilities with ready power connections under long-term contracts. Companies such as CoreWeave, by contrast, invest in expensive graphics processors and rent their computing capacity to customers. VanEck says the high borrowing costs in the latter group, combined with inflation data and pre-election uncertainty, increased selling pressure.
Why is VanEck focused on power capacity?
According to VanEck’s assessment, no cancellations have been seen in signed lease agreements. The main obstacle to expanding data center capacity is not a lack of demand, but the wait to obtain a new connection to the power grid. As a result, existing power connections give companies an advantage by allowing them to offer capacity to customers sooner.
VanEck also sees the decline in value of companies generating steady income from long-term contracts during the sell-off as a potential entry opportunity.
Not investment advice.