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Strategies & Market Trends : The Financial Collapse of 2001 Unwinding -- Ignore unavailable to you. Want to Upgrade?

To: elmatador who wrote (12851)	7/30/2024 1:46:51 PM
From: Elroy Jetson	1 Recommendation Recommended By elmatador Read Replies (2) \| Respond to of 13781

Crypto Miners Are AI’s New Power Source - barrons.com The gigawatts controlled by Bitcoin miners could go a long way to quenching the power thirst of artificial-intelligence data centers. Bitcoin has been unusually boring lately, trading in a relatively narrow range for several months. But the stocks of Bitcoin miners, which own the computers that create new Bitcoins, have been soaring. Those companies have a new side hustle—selling access to electricity to artificial-intelligence companies, an even bigger gold mine than Bitcoin. A flurry of deals between Bitcoin miners and AI data-center companies mark an unusual twist in the race to power AI; the electricity needed to power ChatGPT-like apps may come from crypto companies. That possibility has lifted some of the Bitcoin mining stocks by more than 50% this year. At first blush, it’s a strange pairing. Artificial intelligence is an enormous mainstream technology that’s expected to transform everything from healthcare to media to warfare. Cryptocurrency miners, which own warehouses full of computers, are like trading posts in the Wild West of digital assets. The value of their assets is tied to price fluctuations in opaque markets. Just two years ago, several miners went bankrupt when crypto prices crashed. But there’s an industrial logic to a Bitcoin-AI partnership. Bitcoin mining companies consume enormous amounts of electricity. Bitcoin miners collectively use more power than the entire country of Argentina. AI data-center owners desperately need power to train and launch their models. A single query to an AI chatbot can use nearly 10 times as much power as a Google search. The Federal Energy Regulatory Commission estimated that data centers would need 35 gigawatts of power capacity in 2030, up from 19 gigawatts in 2023. J.P. Morgan Securities analyst Reggie Smith says that the 14 miners he covers manage 5 gigawatts of power capacity today and have another 4.5 gigawatts in the pipeline. Companies such as Microsoft, Google, Meta and Amazon are in an arms race to secure that power as quickly as possible as they compete to become dominant players. The approval process to hook into the electricity grid in much of the country takes longer than four years. So, getting access to power more quickly is worth money. The gigawatts controlled by Bitcoin miners could go a long way to quenching the power thirst of the AI giants. Morgan Stanley analyst Stephen Byrd put a dollar value on the power the crypto companies control, estimating that they could be worth more than double their enterprise values if their AI potential was taken into account. “This value is more significant than appreciated,” he wrote last month. The concept is no longer theoretical. Core Scientific, an Austin, Texas–based crypto miner with operations around the country, agreed in June to host computers from Nvidia-backed data-center operator CoreWeave. CoreWeave offers cloud-based hosting for AI operators like Microsoft. The deal gives CoreWeave access to 270 megawatts worth of power with an option for 230 megawatts more, and is worth $4.7 billion in cumulative revenue over 12 years, the company said. It’s a boon for Core Scientific, which just emerged from bankruptcy protection in January. CoreWeave tried to buy Core Scientific for $5.75 per share, or about $1 billion, but the company rejected the offer. Core Scientific stock has doubled since the start of June and now trades around $11, for a market cap of about $2 billion. The Valkyrie Bitcoin Miners exchange-traded fund is up 15% in the past month, and 35% for the year. The AI opportunity couldn’t come at a better time for the nation’s dozen or so large crypto miners. Lately, miners’ margins have narrowed as the number of Bitcoins created each day was cut in half through a process called the “halvening” that happens about every four years and is designed to cap the total number of Bitcoins created. Bitcoin mining can still be a lucrative business when prices are high. Miners like Core Scientific can earn gross margins above 40%. But hosting deep-pocketed AI-connected clients is much more valuable. Core Scientific CEO Adam Sullivan said in an interview that the company makes margins closer to 80% in its hosting business. “Profitability is something that you’re always going to be chasing in this industry,” he said. “And you’re going to have to chase that to many different locations over the course of the next few halvenings.” Other miners have been transitioning, too. Miami-based Hut 8 once made 100% of its revenue from mining but now has transitioned about 40% of its business to these new ventures. The company received $150 million earlier this month from investment firm Coatue Management to build out an AI data-center hosting platform. “Our base revenue from co-location, managed services, and hosting is going to be strong because they’re long term contracts,” said Hut 8 CEO Asher Genoot in an interview. There are limits to this business model, of course, and skeptics abound. This isn’t the first time companies with volatile pasts have gravitated to a hot new trend. In addition, it can be dangerous to extrapolate the details of a few deals as if they apply equally to a wide group of stocks. Several major Bitcoin miners, such as Riot Platforms, have shown no signs of transitioning their business models away from cryptocurrencies. Riot didn’t respond to a request for comment. Some investors have publicly questioned whether mining companies are all equipped to take on AI data-center loads. Bitcoin mining warehouses are much more bare-bones than AI facilities. They use lower-power microchips and need much less extensive cooling systems, for instance. Upgrading the buildings is no small task. A Bitcoin mining site can cost $300,000 per megawatt to build out; an AI data center can cost $8 million per megawatt, according to Genoot. Activist short seller Culper Research took aim at Bitcoin miner Iris Energy this month, writing in a report that the company’s real estate was ill-equipped to transition to AI hosting, like a “Prius at the Grand Prix.” In an interview, Iris CEO Daniel Roberts said that Iris has been well positioned for data-center hosting since it was founded in 2018, and has all the necessary equipment, such as fiber cables, at its centers. It also gets its power from clean sources, a priority for some tech companies. Smith, the J.P. Morgan analyst, says Iris is the “best positioned” miner to take advantage of the AI opportunity, because it has already bought Nvidia chips and “has a track record of building/delivering (relatively) high quality data centers on time.” Bitcoin companies have often found it hard to convince investors that they’re mining digital gold. They’re making more headway with their new argument: the real gold is in their wires.

To: elmatador who wrote (12851)	8/3/2024 2:55:50 PM
From: Elroy Jetson	1 Recommendation Recommended By elmatador Respond to of 13781

Iron Mountain (NYSE:IRM) has lately been priced to take advantage of the huge demand for data centers. I was accustomed to the Iron Mountain REIT paying a 5% dividend and couldn't figure out how they could build more data centers without taking on a lot more debt, so I intended to sell. But with study, I've figured out their strategy. IRM is still managed by extremely smart people - which is not typical for "a warehouse REIT". The part of Data Center's that is in short supply is local electrical supply, with a five year waiting list to obtain new transformers from manufacturers to build or expand substations. Iron Mountain currently has 25 data centers and 1,400 warehouse locations around the world. For decades IRM has made great stride in reducing their electrical usage to reduce costs. As a result, almost all of their warehouse locations can greatly expand their electrical usage without making any investment or requiring changes or approval from their local utility, and virtually all of these facilities have current access to high-speed fiber networks. Just add more air-conditioning, and diesel or battery power back-up in their mammoth warehouses and they can greatly increase their revenues and profits. IRM is yet anoher AI/cloud "bubble stock" that's also a value stock rather than an over-priced bubble. With very little cost, no additional debt, and little lead-time Iron Mountain can convert current paper record warehouses, or a portion of each facility into data centers. No wonder the stock has zoomed to the point where the typically 5% dividend is now paying only 2.44% due to the increase in share price. I may still be selling IRM over the next two years to obtain our 358% capital gain paying little in the way of tax - but I'll be immediately buying back the shares. This way in the future I won't feel locked-in and could later sell IRM without facing untoward tax consequences.