JPMorgan Upgrades Bitcoin Miners as They Embrace AI Technologies

Post by : Bianca Suleiman

Bitcoin mining firms are rapidly adjusting their strategies, capitalizing on the burgeoning demand for high-performance AI computing globally. This trend, which is gaining momentum into 2024, has caught the eye of Wall Street. On November 24, JPMorgan released a report that upgraded two notable miners while expressing concerns about the financial health of others.

JPMorgan elevated its ratings for Cipher Mining and CleanSpark from “Neutral” to “Overweight,” highlighting their ambitious expansion plans geared towards AI-heavy workloads. Notably, Cipher is set to increase its capacity to 1.7 GW by 2026, focusing on high-performance AI computing rather than merely Bitcoin hashing. Concurrently, CleanSpark has added 200 MW to its Texas facility, primarily due to rising AI demand.

Moreover, the bank raised Cipher’s price target from USD 12 to USD 18, while maintaining CleanSpark's target at USD 14. The report indicates that miners who diversify their computational offerings could have a competitive edge as the industry evolves beyond traditional Bitcoin block rewards.

However, the report also included a note of caution. JPMorgan pointed out that many miners are facing increasing pressure to secure capital, often through share offerings on the market. Such actions could dilute current shareholders, with the bank indicating that existing market valuations may not accurately reflect these expanded share counts. Their analysis reveals diluted figures ranging from 20% to 33% higher than what is usually reported.

In light of these dilution concerns, JPMorgan revised its estimates for Marathon Digital, reducing the target from USD 20 to USD 13, and for Riot Platforms, adjusting it from USD 19 to USD 17. While AI demand is injecting fresh energy into the sector, the report emphasizes the critical need for financial prudence among miners navigating this transition.

As Bitcoin miners delve further into the AI computing landscape, the industry looks set for a transformation—where aspects like energy capacity, funding strategies, and diversification become just as essential as mining capabilities.