Bitcoin Miners Have Considerable Upside From Their Power Portfolios: Bernstein

Bitcoin miners have more returns than the power portfolios they control, Bernstein said.

Miners that focus on an efficient power strategy and efficiency are more likely to see a valuation reassessment, the report said.

The brokerage firm said that major miners continue to focus on Bitcoin production, with Riot Platforms, CleanSpark, and Iris Energy in the best position to increase market share.

Bitcoin {{BTC}} miners have significant upside potential relative to the power portfolios they control, broker Bernstein said in a research report published on Wednesday.

“We believe Bitcoin miners can make a stronger case for valuation reassessment by focusing on an active power strategy and pushing the boundaries of power efficiency,” wrote analysts led by Gautam Chhugani.

The report said investors could profit by valuing the companies as “efficient power shells with data center capabilities” rather than as pure bitcoin mining operations. Bernstein noted that miners are trading at a roughly 90% discount to overall data center valuations.

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The bitcoin mining sector has seen a resurgence in value in recent months after Core Scientific (CORZ) signed a 12-year artificial intelligence (AI) deal with cloud computing firm CoreWeave. The market is pricing in the potential AI and high-performance computing (HPC) opportunity and the upside from alternative, higher-yielding use cases for bitcoin mining sites.

The brokerage noted that major miners continue to focus on increasing Bitcoin production and associated hash rates, with Riot Platforms (RIOT), CleanSpark (CLSK), and Iris Energy (IREN) in the best position to expand market share.

The note also noted that there is a gap in power efficiency and runtime, and that miners can benefit by upgrading their hardware to the latest generation ASICs, extracting more hashrate from their existing portfolio. Hashrate, a measure of computational power, is an indicator of industry competition and mining difficulty.

Bernstein said Iris Energy and CleanSpark scored well for power efficiency and uptime, and Core Scientific ranked high for data center uptime. Riot’s efficiency should improve as it powers large power plants, and Marathon Digital’s (MARA) efficiency should pick up as it builds out its own mining portfolio.

“Customization and innovation in mining systems and software can further increase efficiency,” the note said.

The brokerage firm has an outperform rating on CleanSpark, Core Scientific, Iris Energy and Riot Platforms, and a market perform rating on Marathon Digital.

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