Investors monitoring the goings on in the realm of equity-based cryptocurrency know that many crypto miners are undergoing corporate transformations to become artificial intelligence (AI) infrastructure companies. This also includes many residing in the CoinShares Bitcoin Mining ETF (WGMI).
The crypto-to-AI pivot has become a frequently discussed topic and one that is already paying off for WGMI members firms. The CoinShares ETF has seen returns of nearly 295% over the last 12 months. This underscores the valid reasons for miners moving to AI and makes a well-documented point that crypto mining isn’t what it used to be.
“The transition is being driven by weakening economics in Bitcoin mining. Revenues from validating blockchain transactions have been squeezed by falling token prices and rising energy costs, accelerating a shift that began around three years ago toward building infrastructure for AI workloads,” reported Business Today Desk.
WGMI Has Long-Term Allure
Corporate transformations take time, but to the credit of many WGMI holdings, they’ve executed the crypto-to-AI move in expedient fashion. Some have even thrown in the towel on digital currency mining altogether, moving to business models that are mostly AI-driven.
The result, according to CoinShares data, is that AI is currently driving 30% of revenue for cryptocurrency miners. However, some estimates indicate that percentage could swell to north of 50% by the end of this year. In fact, some projections suggest AI could account for as much as 70% of crypto miners’ total sales by the end of this year.
Margins underscore the impetus for WGMI constituents to advance their AI plans. Said differently, margins on Bitcoin mining aren’t as attractive today as they were in prior years, but AI margins are appealing.
“Bitcoin mining gross margins have dropped to around 60% from above 90% during the 2021 bull run, while AI cloud operations generate margins in the mid-80% range,” noted Business Today, citing Bloomberg Intelligence.
Additionally, AI, believe it or not, is less energy-intensive than crypto mining. WGMI holdings and their competitors currently funnel a massive share of revenue into electricity. However, the energy overhead required for AI operations is significantly lower, thus offering a path to better capital efficiency.
To be sure, some cryptocurrency miners aren’t hitting the ball out of the park when it comes to their AI pivots. This discrepancy underscores the advantages offered by WGMI. Not only does the $254.1 million ETF remove the stock-picking burden, it’s actively managed so it can lean into the cream of the AI-to-crypto crop.
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