The Bitcoin (BTC-USD) mining industry is set for notable changes in 2024, presenting both challenges and opportunities for investors and Bitcoin mining stocks. The Bitcoin halving event in April 2024 reduced block rewards from 6.25 BTC to 3.125 BTC, significantly impacting revenue models.
As mining becomes less profitable in higher-cost regions, mining operations are expected to respond by shifting toward areas with cheaper electricity, such as South America and Africa. This could decentralize the global hashrate, previously concentrated in North America following China’s mining ban in 2021.
Furthermore, a notable trend among miners is the shift toward utilizing their infrastructure for artificial intelligence and high-performance computing. This diversification strategy leverages miners’ existing data center capabilities to meet the growing demand for AI and cloud computing services. The global expenses associated with AI data center infrastructure are expected to exceed $76 billion by 2028.
So here are three of the best Bitcoin mining stocks that I feel could leverage this shift in geographical hash rate and the pivot to data center use for AI.
Clarkspark (CLSK)
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CleanSpark (NASDAQ:CLSK) focuses on sustainable Bitcoin mining using renewable energy sources. The company is integrating AI to optimize energy use and improve mining efficiency.
CleanSpark’s strong financial results and growth trajectory also suggest it is positioned to invest in new opportunities related to AI. In the second quarter, CleanSpark reported revenue of $111.8 million (up 163% from a year ago), net income of $126.7 million, and adjusted EBITDA of $181.8 million. The company has a solid balance sheet with nearly $700 million in cash and Bitcoin holdings.
Analysts are highly bullish on CleanSpark’s prospects. The consensus rating for the stock is a “strong buy” with an average price target of $20.11. This represents a significant upside of over 30% from the current stock price. The most optimistic analyst sees the stock reaching $28, which would be an 82% return. This then makes it one of those Bitcoin mining stocks to consider.
Bitfarms (BITF)
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Bitfarms (NASDAQ:BITF) is focusing on decentralizing its mining capacity and using renewable energy sources. The company is integrating AI to manage and optimize its mining operations.
Bitfarms delivered solid Q1 2024 financial results despite a challenging macro environment. Revenue grew 67% year-over-year to $50 million, driven by a 9% sequential increase in Bitcoin production. The company’s gross mining margin expanded to 59%, up from 52% in Q4 2023 and 41% in Q1 2023.
In Q1, Bitfarms secured an additional 24,000 latest-generation Bitmain miners, bringing its total contracted miners for 2024 delivery to 88,000. The company also doubled its contracted power capacity at its Paraguay site, providing significant room for long-term growth. As AI tools become increasingly sophisticated, they could be used to optimize mining hardware settings, predict network difficulty adjustments, and even identify the most profitable mining coins.
Analysts are quite bullish on Bitfarms’ prospects, with a consensus “strong buy” rating and an average price target of $4. This represents 50% upside from current levels and speaks to the disconnect between Bitfarms’ fundamental progress and its still-depressed valuation. At a forward price-to-sales ratio of just 5.2x based on 2024 revenue estimates, Bitfarms looks attractively priced.
Cipher Mining (CIFR)
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Cipher Mining (NASDAQ:CIFR) operates industrial-scale Bitcoin mining data centers and is leveraging AI to enhance its operational efficiency and profitability.
Cipher Mining delivered outstanding financial results in the first quarter. The company reported GAAP net income of $40 million and non-GAAP adjusted earnings of $63 million, a significant improvement from the net loss in the first quarter of 2023. Revenues surged to $48 million, driven by Cipher’s expanding mining operations.
Looking ahead, Cipher Mining has laid out an ambitious growth plan that could drive substantial increases in hashrate and Bitcoin production. The company is on track to reach 9.3 EH/s by the end of Q3 2024, up from its current 7.7 EH/s. More impressively, Cipher aims to reach 25.1 EH/s by the end of 2025, which would represent a more than 3x increase from current levels.
This growth is underpinned by Cipher’s aggressive expansion of its mining facilities. The company recently broke ground on its massive 300 MW data center at Black Pearl, which is now slated to be fully built out in 2025. Cipher is also adding 30 MW of capacity at each of its Bear and Chief JV data centers in Q2 2024.
It could then be one of those Bitcoin mining stocks to consider for investors bullish on both Bitcoin and AI.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor held a LONG position in BTC-USD.
