The head of digital assets research at investment firm VanEck, Matthew Sigel, says one stock market trend may be just getting started.
In a new CNBC interview, Sigel says that publicly-traded Bitcoin (BTC) miner firms have the potential to rack up massive profits by repurposing their electricity for artificial intelligence (AI).
“The simple story of why Bitcoin and AI are connected is that both technologies require large amounts of energy and electricity. And that’s a feature, not a bug. Many of the Bitcoin miners are sitting on massive reserves of electricity at very cheap, long-term contracts, two or three cents per kilowatt hour. The cost of capital for these Bitcoin miners is very, very high. They’ve been forced to fund their operations through dilution, because their revenues fall by 50% every four years. If they can repurpose some of this electricity, upgrade their data centers to serve the AI and HPC (High-Performance Computing) markets, their cost of capital comes down.
Bitcoin miners trade at five or six times EBITDA (Earnings Before Interest, Taxes, Depreciation). AI companies like CoreWeave trade at 20 times EBITDA. Even if you account for the extra CapEx (Capital Expenditure) that they have to spend to repurpose part of their data center capacity, there’s a huge EPS (Earnings Per Share) and multiple uplift, and it is an arbitrage opportunity for these companies that they are aggressively exploiting.”
He says that BTC miner firms that are shifting electricity to help power AI may continue to be top market performers in the coming months.
“Even the hyperscalers like Google have begun to get into this. Google took a 14% stake in TeraWulf (WULF), which is a Bitcoin miner pursuing an AI strategy. Those stocks that have been most aggressive in pivoting to AI and repurposing part of that capacity have been the best performing stocks this year. We think that trend is still early.”
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