Bitcoin Miners Pivot to AI: Stepping Out of Crypto Cycles, Yet Entering New Storms

Author: Vicky Ge Huang

Translator: Chopper, Foresight News

Last year, Ben Gagnon began renovating server rooms originally used for Bitcoin mining, hoping to ride the artificial intelligence wave and transition into an AI computing data center. This seemed like a perfect path: avoiding the collapse of the cryptocurrency market and turning to embrace Wall Street's hottest sector.

The reality is that the AI data center business has also been bumpy. The WGMI index, which tracks this sector, surged 72% in 2025 fueled by the AI rally, but has already fallen 23% year-to-date. The index's constituents include companies such as CoreWeave, Nebius, Corz, and CleanSpark, all of which have transitioned from Bitcoin mining to data centers, and thus have faced immense pressure during the current wave of AI sector selloffs.

"We thought we could find a more stable market by leaving Bitcoin, only to discover that this market is even more volatile than Bitcoin. We've experienced it firsthand," said Gagnon, CEO of Keel (formerly Bitfarms).

Last week, cracks in the AI trading narrative widened further as investors heavily sold off shares of tech giants such as Alphabet and Intel. Emerging cloud service providers are at the center of the selloff, squeezed between heavy debt loads and rising financing costs. Skepticism from prominent industry figures has exacerbated this selling pressure; for example, Elon Musk warned that the debt market has essentially closed its doors to companies that lack stable, substantial revenue streams outside of AI computing services.

Musk stated on X: "This means over 200 emerging computing cloud vendors will face a brutal clearing out and consolidation. Only a few will survive, but not many."

Performance of the CoinShares Bitcoin Mining and Digital Power ETF. Data source: FactSet

The broader backdrop for Bitcoin miners shifting to AI is that mining itself is becoming increasingly difficult: hyper-competitive hash rate races continue to compress profit margins; the Bitcoin halving mechanism cuts miner block rewards in half every four years, forcing companies to seek new revenue sources; and as the crypto market trends downward, miners' Bitcoin reserves continue to shrink.

CoreWeave, originally an Ethereum mining project, was once the most shining success story in this sector after pivoting to AI. As valuations soared and it secured investment from NVIDIA, other miners rushed to replicate this transformation path.

Miners with shrinking profits quickly capitalized on the AI infrastructure boom. Their server rooms were already equipped with large-capacity power supply and flexible power contracts; unlike traditional data centers bound to long-term clients, miners can flexibly allocate power resources to supply AI computing workloads on demand.

For a time, this transition was indeed smooth sailing. With hyperscale cloud providers like Alphabet, Amazon, Meta, and Microsoft ramping up AI capital expenditures by hundreds of billions, these data centers holding massive power capacity suddenly became essential. Former crypto miners secured entirely new revenue streams by signing lease agreements with tech giants and important customers like Anthropic.

However, the wind changed abruptly as investors began questioning whether massive AI investments would yield returns. Whenever competition intensified, growth slowed, or data center operators reported construction bottlenecks, panic spread. Recent high interest rates and geopolitical uncertainties have also led the market to doubt whether debt-laden computing developers can sustain rapid expansion.

Once the benchmark for miners transitioning to AI, CoreWeave has now become a quintessential example of high-risk AI plays. Its stock has fallen 25% year-to-date, and both its equity and bonds have faced intense selling in recent weeks.

Meanwhile, AI data centers are beginning to face public backlash similar to what Bitcoin mining encountered years ago: politicians are starting to criticize these facilities for consuming vast amounts of electricity and water, mirroring the resistance faced during early mining expansions.

Beyond the macro environment, different data center business models have their own pros and cons. Companies that completely abandon mining and fully pivot to computing centers have one advantage: a single-line business that is easier for Wall Street to value.

Gagnon revealed that Keel Infrastructure has completely halted its Bitcoin mining operations within the United States, but the new data center has yet to sign client contracts. The company expects three computing sites to generate revenue next year once commercialization processes and site construction are completed. Keel Infrastructure's stock has fallen 6.8% year-to-date.

Kevin Dede, an analyst at JonesTrading, stated: "Investors are used to labeling companies. Firms that undergo incomplete transformations and remain indecisive will struggle to achieve valuations comparable to those that have completed their pivot and established clear positioning within the investment community."

However, pivoting completely to a computing center also means losing the steady stream of newly mined Bitcoin that supports expansion. Once the mining rigs are pulled, companies no longer have daily stable crypto revenue, which was originally a key funding source for capital expenditures.

Bitcoin mining equipment inside a CleanSpark mine in University Place, Georgia, in 2022

Data from Needham analyst John Todaro shows: US-listed mining companies sold a total of 48,900 Bitcoin in the first half of the year, setting a record high for the first half of a cycle. He expects that from the second half of this year through early 2027, mining companies will continue to sell off their Bitcoin reserves to raise funds for new computing centers.

Todaro said: "We learn from these companies that financing for AI computing projects is becoming more difficult. Therefore, we believe that if companies still hold Bitcoin on their balance sheets, they are likely to increase sales to cover capital expenditures and advance projects that haven't yet received full funding."

Some mining companies opt for a middle-ground approach. For example, CleanSpark treats Bitcoin mining as a transitional tool for data center development: operating on the same site, it mines to earn crypto revenue while building customer-adapted data centers nearby; when needed, it simply switches the power to computing workloads.

CleanSpark holds over $1 billion in Bitcoin on its balance sheet, and its stock has fallen 19% year-to-date.

CleanSpark CEO Matt Schultz stated: "We do not plan to continuously invest substantial capital in mining. Instead, we treat mining as a tool to secure large-capacity power allocations. The Bitcoin on our balance sheet serves as a capital reserve."