There’s an important new trend taking over the Bitcoin (BTC +3.40%) mining sector right now. Bitcoin mining companies both large and small are now selling off their Bitcoin holdings and using those funds to finance a major new expansion into artificial intelligence (AI) computing.
Obviously, this has enormous implications for choosing Bitcoin mining stocks. Gone are the days of simply investing in the largest miners that have the most Bitcoin on their balance sheets. The name of the game is now AI, and investors are willing to pay a premium for Bitcoin mining stocks winning this game.
Sell Bitcoin, buy AI?
As the price of Bitcoin continues to fall, it is only intensifying this transition into AI infrastructure. In some cases, Bitcoin mining companies are selling off all of their Bitcoin and going all-in on AI. In other cases, they are selling off only a portion of their Bitcoin and simply diversifying into AI as a way to boost revenue generation.
Guess which move the market likes better? That’s right — investors want to see evidence of an all-in move on AI. As long as Bitcoin is under a price of $100,000, investors recognize that it is more profitable to divert expensive computing power away from Bitcoin mining and into AI.
Image source: Getty Images.
Case in point: Wall Street investment bank Morgan Stanley (MS +0.69%) recently initiated coverage of the Bitcoin mining sector, with a focus on companies making the move into AI. The company is now overweight on two Bitcoin mining stocks — Cipher Digital (CIFR +5.25%) and TeraWulf (WULF +5.52%) — that are making the biggest moves into AI. In contrast, it is underweight on Bitcoin mining behemoth MARA Holdings (MARA +2.46%), which has only recently made a new strategic shift into AI.
Today’s Change
(5.52%) $0.81
Current Price
$15.48
Key Data Points
Market Cap
$6.2B
Day’s Range
$15.15 – $15.48
52wk Range
$2.06 – $18.51
Volume
22K
Avg Vol
30M
Gross Margin
-166.51%
But just keep in mind: Bitcoin is highly cyclical, and this “sell Bitcoin, buy AI” trade only makes sense when the price of Bitcoin is depressed. After all, Bitcoin mining companies get paid the most when the price of Bitcoin is highest. When the price of Bitcoin is low, it makes economic sense to look elsewhere for opportunities.
Which Bitcoin mining stocks to buy?
All you have to do is compare the performance of Bitcoin mining stocks over the past year to see what’s happening. Shares of Cipher Digital are up 364% over the past 12 months. Shares of TeraWulf are up 351%. By way of comparison, shares of MARA are down 35% over this time period.
Today’s Change
(5.25%) $0.72
Current Price
$14.43
Key Data Points
Market Cap
$5.6B
Day’s Range
$14.02 – $14.48
52wk Range
$1.86 – $25.52
Volume
29K
Avg Vol
30M
Gross Margin
-6045.14%
So if you’re thinking about investing in Bitcoin mining stocks, the emphasis needs to be on companies that are making the move into AI computing. Right now, Morgan Stanley thinks the upside could be as high as $38 for Cipher, and as high as $37 for TeraWulf.
That’s a nifty little 2x to 3x return on investment, given today’s prices. For now, at least, that’s far more than you’d be making if you were investing in Bitcoin or Bitcoin-centric companies.