AI pivot pushes bitcoin miners toward a 70% revenue Mmilestone

The companies that built billion-dollar businesses mining Bitcoin are on track to generate most of their revenue from artificial intelligence by the end of the year – a milestone that marks an entire industry’s pivot away from the cryptocurrency that created it.

The shift comes as revenue earned for validating transactions on the blockchain is being driven down by plummeting token prices and soaring energy costs. That is accelerating the pivot that began around three years ago to providing infrastructure that generates computing power for AI firms, which is projected to be worth billions of dollars in revenue.

CoinShares estimates AI will account for roughly 70% of combined revenue at publicly listed miners by December, up from about 30% today. The math is stark: Bitcoin mining gross margins have collapsed from above 90% during the 2021 bull run to around 60%, while AI cloud operations generate margins in the mid-80s, according to Bloomberg Intelligence. Bitcoin fell as much as 50% from an all-time high of around $126,000 reached in October.

“This massive decline in Bitcoin’s price, coupled with the fact that energy prices are going up, I think this is going to compel them to make that transition even faster,” said Vasu Kasibhotla, a senior industry analyst at Bloomberg Intelligence in New York.

The gap is widening in every direction. Electricity consumes roughly 40% of mining revenue, pushing total costs into the low-to-mid 90% range. For AI cloud operators leasing out high-powered chips, that figure is in the low single digits, Kasibhotla said.

The hash price, a key measure of revenue for Bitcoin miners, has hit record lows in recent weeks, according to data compiled by Luxor Technology. Mining difficulty, an indicator of total computing power used for mining, has also seen sharp declines, suggesting some miners have unplugged their machines since their operations are unprofitable.

And Bitcoin’s own software is designed to cut the rewards paid to miners in half every four years – a built-in margin squeeze, the most recent of which took place in 2024 with the next expected in 2028 – with no equivalent in the AI business. The projected annual revenue for mining this year is around $12 billion, based on the current price of Bitcoin of about $74 000.

“The long-term economics of HPC and AI data centres should trump Bitcoin mining. Just from a business operations standpoint, you get more visibility, better margin and stronger cash flows out of the data center business,” said Brian Dobson, a managing director at Clear Street, which has maintained a buy rating for Cipher Digital Inc. and Hut 8 Corp. 

Rather than absorb that next cut in revenue thanks to the halving, the largest miners are getting out. Bitfarms changed its name to Keel Infrastructure Corp. this month. Cipher has wholeheartedly pivoted to being an AI data-center operator, while divesting some of its Bitcoin mining assets. MARA Holdings Inc. has decreased its Bitcoin stockpile, in part to put more focus on developing AI infrastructure, with the company selling about $1 billion worth of the token in recent weeks.

Still, the Bitcoin network is likely to remain secure even after a large number of miners leave since its self-regulating algorithm will provide enough token rewards as an incentive for the remaining ones to stay and continue to process transactions on the blockchain.

Shares of miners that have pivoted to be AI data-center operators early have climbed to record highs. TeraWulf, IREN, Cipher and Hut 8 have all signed multi-year contracts with high-profile tech companies such as Google, Microsoft and Anthropic. Revenue from such contracts have been projected to be in the billions of dollars.

“This transition may prove to be the end of an era for some large US miners, not necessarily in terms of survival, but in how they operate, as they adapt away from models built for a different capital and energy market environment,” said Matthew Kimmell, an investment strategist at CoinShares, which has an exchange-traded fund that tracks public crypto miners. “Margins are just getting really thin, hash price kicking bottoms. It’s brutal out there.”

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