KBW is turning more cautious on the bitcoin mining sector, warning that the industry’s pivot toward artificial intelligence and high-performance computing (HPC) could take longer to generate returns than the market currently expects.
In a series of notes to clients published Monday, KBW analyst Stephen Glagola downgraded Bitfarms (BITF), Bitdeer (BTDR) and HIVE Digital (HIVE) from outperform to market perform. While the shift toward AI and HPC hosting remains strategically attractive, Glagola said the monetization path is burdened by execution risk, long development timelines and heavy capital requirements.
Following the 2024 bitcoin halving and a resulting compression in mining margins, miners are increasingly repositioning themselves as digital infrastructure providers. By repurposing so-called “warm shell” facilities — sites already equipped with high-density power and cooling — companies aim to transform mining operations into AI-ready data centers, swapping volatile block rewards for longer-term enterprise contracts.
The transition, however, is far from straightforward. KBW cautioned that the stringent uptime requirements and upfront investment needed for HPC create a high-stakes divide between operators able to execute successfully and those at risk of being left with underutilized or stranded assets.
Bitfarms: Sharon optimism already priced in
Glagola downgraded Bitfarms to market perform, arguing that the market has largely priced in the upside potential of the company’s 120-megawatt Sharon, Pennsylvania, facility. While the analyst raised his price target to $3.00 from $2.50, he does not expect a binding leasing agreement until the second half of 2026.
He also expressed skepticism around Bitfarms’ potential entry into AI cloud services in Washington state and flagged rising leverage as a growing concern. Bitfarms shares were little changed in early trading.
Bitdeer: scale gains, AI clouds uncertainty
Bitdeer was also downgraded, with KBW cutting its price target sharply to $14 from $26.50. While the bank acknowledged that Bitdeer is on track to become one of the largest publicly listed miners by 2026, supported by its vertically integrated Sealminer platform, it warned that the company’s expanding focus on AI cloud services adds meaningful uncertainty.
Glagola cited Bitdeer’s relatively small current scale, concentrated ownership structure and exposure to related-party transactions as reasons to adopt a more cautious stance. Shares were modestly higher at $13.91.
HIVE: Questioning the AI advantage
HIVE Digital saw the steepest reduction in its price target, cut to $3.50 from $11.00, as KBW questioned the durability of the company’s AI cloud strategy. Glagola noted that HIVE’s dependence on partner channels and equipment financing leaves it “sub-optimally positioned” relative to established data center operators.
The bank also highlighted HIVE’s negative pre-tax return on invested capital, suggesting the company is expanding its mining hashrate without generating adequate operating returns in a depressed hashprice environment. HIVE shares were up 0.3% at $3.04 at the time of publication.
Across all three names, KBW’s conclusion was consistent: the shift from bitcoin miner to AI-focused data center operator is capital-intensive, slow to monetize and likely to demand more dilution — and more patience — from investors than the market currently assumes.
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