Shares of bitcoin miners that pivoted to AI data center infrastructure fell an average of 35% in October. VanEck argues the drop did not reflect their business fundamentals and that the shares look oversold.
Investment manager VanEck says bitcoin mining companies that moved into artificial intelligence data center infrastructure look oversold, calling the recent crash a dislocation rather than an outright rejection of the business model.
Prices for these shares dropped by an average 35% in October, the firm said in a note on Wednesday. Investors treated companies in very different sectors as one monolithic trade, according to VanEck.
VanEck says miners such as Hut 8 and Core Scientific, which it calls powered shell providers, suffered from contagion fears spreading from GPU rental companies such as CoreWeave. Credit fears then reached these providers, alongside macro factors such as a hotter-than-expected U.S. consumer price index read in September and uncertainty ahead of the November midterm elections.
Powered shell providers supply power to GPU rental companies, which have suffered from higher AI debt yields as they fund costly chips. However, VanEck said that although these firms, also called neoclouds, faced high debt service costs, no signed leases were canceled.
According to VanEck: "the power these companies control appears to be the binding constraint on AI compute." The firm also believes the stocks appear significantly dislocated from fundamentals given their long-term contracted cash flows.
Backlogs in grid connection timelines, VanEck adds, effectively place a scarcity premium on the energy capacity that bitcoin miners already provide. That makes the October rout a potentially attractive entry point rather than a collapse of the AI-pivot narrative, in the firm's view.
Source: CoinDesk
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