Bitcoin mining companies that have shifted toward AI data center infrastructure may be significantly undervalued following October’s sharp sell-off, according to investment manager VanEck. The firm characterized the decline as a temporary market dislocation rather than a loss of confidence in the underlying business model.
Shares of these companies plunged an average of 35% in October as investors broadly sold AI infrastructure-related stocks without distinguishing between their different business models, VanEck explained in a research note released Wednesday.
The investment manager said Bitcoin miners expanding into AI infrastructure, including Hut 8 and Core Scientific, were caught up in negative sentiment affecting GPU rental providers such as CoreWeave. VanEck refers to these companies as powered shell providers (PSPs).
Investor concerns about credit exposure spread across the sector, adding to pressure from broader economic uncertainties. These included a stronger-than-expected U.S. Consumer Price Index reading for September and political uncertainty ahead of the November midterm elections.
Powered shell providers supply electricity and physical infrastructure to GPU rental businesses, which have faced higher financing costs while purchasing expensive graphics processing units to meet growing AI computing demand.
VanEck believes electricity availability remains the biggest obstacle to expanding AI computing infrastructure, making the power capacity controlled by Bitcoin miners increasingly valuable.
The firm noted that current valuations appear disconnected from the companies’ underlying fundamentals, particularly considering the long-term contracted cash flows supported by their infrastructure agreements.
It also emphasized that the primary limitation for AI computing expansion is access to electricity rather than insufficient customer demand.
Although GPU rental companies, also known as neocloud providers, are dealing with rising debt-servicing costs, VanEck pointed out that no signed leasing agreements had been canceled.
At the same time, extended waiting periods for grid connections are creating additional scarcity value for existing power infrastructure. Bitcoin miners that already control substantial electricity capacity could therefore be well positioned to benefit from the expansion of AI data centers.
VanEck views October’s steep decline as a possible entry opportunity for investors rather than a sign that the broader shift toward AI infrastructure has failed.
