After the Halving, Could These Under-the-Radar Bitcoin Mining Stocks Have a New Multimillion-Dollar Market Opportunity in Artificial Intelligence?

Now that the highly anticipated Bitcoin (CRYPTO: BTC) halving is in the books, all eyes are focused on the future price of Bitcoin. They should also be given the historical background of halving events that led to massive bull market rallies for Bitcoin.

But don’t ignore what’s happening with Bitcoin miners. Halving has a significant impact on business models as it cuts mining rewards in half. They will need to explore new options to compensate for this shortcoming, and one of the things everyone is talking about right now is artificial intelligence. So how big is this AI opportunity for Bitcoin miners?

Companies are switching from mining to artificial intelligence

The transition from Bitcoin mining to AI computing may seem like a giant leap, but it’s not. Bitcoin miners already use enormous amounts of computing power to solve the cryptographic puzzles required to mine Bitcoin. After the halving, they will look to shift some of that computing power into higher-margin AI computing.

Image source: Getty Images.

According to billionaire Mark Cuban, these miners really have no choice. The halving will significantly reduce revenue per block, forcing miners to re-evaluate their business models as profits dwindle. Miners may find current operations less viable as the cost per Bitcoin effectively increases as operational expenses remain constant while rewards decrease. These financial pressures may lead miners to explore alternative business opportunities to maintain profitability.

And if they can’t adapt, they could go bankrupt. One way to adapt to the new reality is to switch to AI computing.

Considering that industry analysts have been talking about the potential impact of the halving on the Bitcoin mining industry for months, it is perhaps no surprise that a growing number of smaller Bitcoin miners are already exploring the potential shift to AI. Three companies (Hive Digital Technologies (NASDAQ: HIVE), Hut 8 Corp. (NASDAQ: HUT), and Bit Digital Inc. (NASDAQ: BTBT) currently have AI computing operations running. Terawulf Inc. (NASDAQ: WULF) and Core Others, like Scientific (NASDAQ: CORZ), are also planning to add new AI computing capacity.

How realistic is the transition to artificial intelligence?

The only problem, of course, is that moving from Bitcoin computing to AI computing requires more than just pushing a button or flipping a switch. There are some types of legacy Bitcoin computing equipment that cannot be reused for AI that require high-end GPU computing power.

Moreover, some types of renewable energy used by Bitcoin miners are not well-suited to AI computing with stringent uptime requirements, so they may have to move their operations elsewhere. And the barrier to entry for AI computing is much higher than it is for Bitcoin mining, especially when it comes to the overall infrastructure required to deliver high-end computing power to customers.

The story continues

So for now, we don’t see much impact in terms of Bitcoin miners and AI computing. Hive Digital embarked on a much-talked-about “AI rebrand” last year, but currently still only gets 3% of its revenue from AI computing. Hive Digital reported total revenue of $30 million in its latest quarter; about $1 million of that came from AI-related computing.

Watch out for Bitcoin price

The key variable moving forward is the Bitcoin price. According to CoinShares, the breakeven cost of production for Bitcoin miners after the halving is $53,000 per coin. So if Bitcoin, currently trading around $57,000, falls below that level, Bitcoin miners may be forced to abandon Bitcoin altogether and shift everything they have to AI or other forms of high-performance computing.

However, if the Bitcoin price rises next year, as many analysts expect, miners can get through this part of the Bitcoin halving cycle without making major changes to their operations. This is why Bitcoin’s price is so important. It will fundamentally influence how miners respond to the potential market opportunity in AI.

Looking forward, I’m adding a number of smaller, under-the-radar Bitcoin mining stocks to my watch list. These include Hive Digital Technologies and Hut 8, which are at the forefront of the new AI computing trend. Next time they report earnings, I’ll be taking a much closer look at their overall revenue mix as well as any changes they’ve made to their Bitcoin mining fleet.

But for now, I’m not ready to invest in Bitcoin miners at a time when the halving has the potential to cause an industry-wide shakeup.

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Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in Bitcoin and recommends it. The Motley Fool has a disclosure policy.

Could These Bitcoin Mining Stocks Under the Radar After Halving Have a New Million-Dollar Market Opportunity in Artificial Intelligence? originally published by The Motley Fool