Bitcoin Miners at a Crossroad: Seize Market Share or Go All-In on AI?

Summary:
Although pure miners continue to expand their market share, investors are still paying a premium for miners venturing into AI and high-performance computing (HPC) data centers.

Marathon, Riot, and CleanSpark saw higher production in September than in August.

Since the halving in April, Marathon’s Bitcoin production in September exceeded any other month.

In this era of thin profits, Bitcoin (BTC) miners are facing a unique survival threat: they can pivot to powering artificial intelligence (AI) or high-performance computing (HPC) and watch their stocks soar, or they can stay in their original domain and dominate, but face sluggish stock performance.

Regardless, this is the story of September’s mining activity in terms of stock returns.

The largest miners by market cap—MARA Holdings (MARA), Riot Platforms (RIOT), and CleanSpark (CLSK)—all saw an increase in Bitcoin mined in September compared to August. These companies have stronger balance sheets and larger mining operations, helping them withstand the drop in mining profitability caused by April’s Bitcoin halving.

However, investors haven’t rewarded their stock with premiums, as their performance in September remained poor. Meanwhile, miners focusing on AI and HPC computing, such as Core Scientific (CORZ), TerraWulf (WULF), and IREN (IREN), outperformed Bitcoin in September.

September Bitcoin Miner Stock Prices (TradingView)

The shift in investor sentiment isn’t surprising, as the April halving (which reduced BTC mining rewards by 50%) intensified mining competition, lowering profit margins. Adding to the negative sentiment, the recent approval of a U.S. spot Bitcoin exchange-traded fund (ETF) has reduced investor interest in mining stocks.

Instead, investors are rewarding miners who now use part of their data centers to host AI and HPC-related machines to diversify revenue. AI and HPC computing require significant power, and Bitcoin miners already have access to that power, making them attractive resources for AI and HPC companies looking to scale quickly.

In fact, looking at September's stock prices of listed miners, larger-cap miners saw their stock prices rise by 4% to 9%, while AI and HPC-related miners surged as much as 25%. Bitcoin’s price rose by about 7%, while the broader crypto market benchmark, CoinDesk 20, rose about 12%.

Despite the relatively flat Bitcoin trading, miners have already begun surging in October. Riot rose 12%, and Cipher Mining (CIFR) rose 8%. Historically, October is one of Bitcoin's strongest months, earning it the nickname “Uptober.”

September Recap
Post-halving, the mining economy remains tough.

The Bitcoin network’s hash rate (measured on a seven-day moving average) hit an all-time high of 693 EH/s, maintaining an average hash rate of 630 EH/s. The hash rate indicates the level of mining competition and measures how much computing power is online on the network.

In September, Bitcoin's difficulty (a measure of how hard it is to mine a new block on the network) also hit an all-time high. Difficulty adjusts every 2,016 blocks based on computing power, ensuring a new block is mined every 10 minutes. Meanwhile, according to Glassnode, although hash price remains near historic lows, it hit a monthly high of $48.0 per hour/second, a key profitability metric for miners.

Diving into individual miner data for the month, MARA (market cap of $4.8 billion and the largest listed miner, formerly Marathon Digital) seemed to find success in September, with its energized hash rate increasing by 5% to 36.9 EH/s. MARA also mined 705 BTC, a 5% increase from the previous month, the highest single-month production since the April halving. The company also increased its BTC holdings to 26,842, the second-largest reserve among publicly listed companies, behind only MicroStrategy. It remains on track to hit 50 EH/s by the end of 2024.

City Value Third-Largest Miner Riot Platforms’ Bitcoin production also increased by 28% in September**, as the company boosted its facilities' computing power. Riot expects its hash rate to reach 36.3 EH/s by Q4 2024 and 56.6 EH/s by H2 2025. Riot currently holds 10,427 BTC on its balance sheet.

Hurricane Helene Shuts Down Some Infrastructure
Other notable trends in September included the impact of Hurricane Helene. CleanSpark, the fourth-largest miner by market cap, was among the companies affected. The company reported no major infrastructure damage but had to shut down some operations due to the hurricane.

As capital markets remain tough for Bitcoin miners, these companies have begun using creative ways to raise funds for expansion. One standout in September was Cipher Mining, which mined 155 Bitcoins and sold 923 Bitcoins to purchase a 300MW mining site, which will be used for HPC hosting. The miner now holds 1,512 Bitcoins.