Bitcoin Miners With Attractive Power Contracts Are Potential M&A Targets, JPMorgan Says

• Power demand from hyperscalers and AI firms may make bitcoin mining companies potential takeover targets, the bank said.

• JPMorgan said CoreWeave’s deal with Core Scientific validates the mining sector’s pivot to HPC.

• The report said that bitcoin miners under financial pressure following the recent halving may be more susceptible to a deal.

Hyperscalers and artificial intelligence (AI) firms are exploring different alternatives to securing their energy needs, and this may make bitcoin (BTC) mining companies with attractive power contracts appealing acquisition targets, JPMorgan (JPM) said in a research report on Wednesday.

A hyperscaler is a large-scale data center specializing in delivering huge amounts of computing power.

Mergers and acquisitions are heating up in the mining sector, after the halving. On Tuesday, shares of Core Scientific (CORZ) surged higher after cloud computing firm CoreWeave signed a 200 megawatts (MW) artificial intelligence deal with the bitcoin miner, and was also reported to have made an offer to buy the company in an all-cash deal. Meanwhile, another large bitcoin miner, Riot Platforms (RIOT), made a hostile offer to buy out peer Bitfarms (BITF) last month.

The deal with CoreWeave validates and may accelerate the mining sector’s involvement in high-performance computing (HPC), JPMorgan said in the report. Within the bank’s coverage, the Core Scientific news is most impactful to overweight-rated Iris Energy (IREN), which it said was early to embrace HPC and has the rights to develop over 2 gigawatts (GW) of power.

JPMorgan said this deal could raise the “valuation floor for sub-scale mining operators, as a new class of buyers (Hyperscalers) has emerged.” The bank also added that it could help “rationalize the bitcoin network” by moving power capacity away from the miners, and this would improve the profits of the remaining operators.

The bank estimates that U.S. listed bitcoin miners draw up to 5 GW of power and have access to an additional 2.5 GW, “which makes them a potentially attractive target.”

Furthermore, some bitcoin miners are under financial pressure to exit the market following the recent halving event and so may be more receptive to a deal, the report added.

Broker Bernstein said last week that Riot Platforms (RIOT) was the best positioned to attempt to consolidate the mining sector, as the miner has the financial capacity for deal-making.