The temptation of the 10 billion long-term cooperation: the life and death of the power grid for mining companies to switch to AI computing power

According to Woofun AI, as the Bitcoin market continues to be sluggish, Blockchain Knight wrote that leading mining companies represented by Cipher Digital (CIFR.US) are speeding up their transformation to AI data center business, trying to hedge the risk of losses in the mining business by signing stable contracts for 10 to 20 years.

Hut 8 (HUT.US) is currently one of the most thorough transformation cases. By the end of June, it had signed an AI data center capacity of 949 MW, corresponding to the underlying contract value of about US$26.6 billion. After full operation, it is expected to generate an average net operating revenue of over US$1.75 billion per year. Bitdeer (BTDR.US) also signed a $4.7 billion Norwegian AI lease in early August to provide Anthropic with 121 MW of computing power capacity, with an estimated annual revenue of around $290 million.

In contrast, the profit margin of the mining business is already under severe pressure. Cipher Digital (CIFR.US)'s interest expenses in the second quarter reached 66.7 million US dollars, while mining revenue was only 24.8 million US dollars, a ratio close to 2.7 to 1; despite selling 1,619 BTC in the first half of the year to cash out $120 million, it still lost 47.7 million US dollars. To support the AI business, Hyperscale Data (GPUS.US) recently sold more than 150 BTC and cashed out about $9.6 million.

According to data compiled by Woofun AI, this collective shift from mining to AI computing power leasing is essentially a desire for long-term stable cash flow from mining companies under extreme profit pressure.

However, the path of transformation is fraught with misallocation of funds, high financing costs, and heavy resistance from regulatory audits. At the beginning of August, the Texas Governor ordered an audit of all data projects being prepared. Analysts Bernstein pointed out that this move would curb speculative development and reduce the supply of new electricity, thereby increasing the scarce value of approved electricity capacity. Cipher Digital (CIFR.US) was greatly affected by the expansion plan's heavy reliance on Texas grid access.

Meanwhile, in June, FERC requested six regional power grid operators to re-examine the access rules for heavy users. The direction of tightening regulations is clear, making it difficult for power grids to withstand the explosive growth in data center demand. At the execution level, the capital intensity of building AI data centers far exceeds that of mining farms, and a single Bitdeer (BTDR.US) project requires an initial investment of 500 million US dollars, causing a huge mismatch between project financing and the company's cash flow.

Although Cipher Digital (CIFR.US) obtained US$2.84 billion from financing activities in the first half of the year, its main business could not even cover interest. Every financing path had costs, such as losses on currency sales, dilution of shares, and debt issuance to pay interest. Regulatory uncertainty poses a huge potential risk for mining companies that base future revenue on “about to be approved” power capacity.

In the long run, I'm afraid the only ones that can actually complete the transformation are mining companies that already have electrified substations and contracted tenants. For companies that only rely on data on PPT to support their valuations, the market estimates that sooner or later they will reprice them. Of course, if the Bitcoin price rebounds in the next 1-2 years and the construction of AI computing power centers is briefly saturated, the industry pattern may once again dramatically reverse, and the survival logic and strategic focus of mining companies will also face new tests at that time.