Traders are increasingly betting against top Bitcoin mining companies that are pivoting to the booming AI sector. While most of their stock is up, their short interest has remained elevated.
CLSK, RIOT, IREN, WULF, and CORZ are Under Intense Pressure
CleanSpark (CLSK) has the highest short interest among major publicly traded Bitcoin miners at 33%, followed by Core Scientific (CORZ) at 23%, TeraWulf (WULF) at 22%, Iren (IREN) at 18%, and Riot Platforms (RIOT) at 15%.
Short interest refers to the percentage of outstanding shares that have been sold short but not yet repurchased. A high number indicates elevated bearish sentiment. In some cases, stocks with high short interest tend to do well during a short squeeze.
These Bitcoin mining companies have had to change their business strategies in the past few months as Bitcoin has remained under pressure. After soaring to a record high of $126,300 late last year, Bitcoin has tumbled to $63,000 today. At the same time, the ongoing data center boom has driven up energy prices, affecting their margins.
Most importantly, the companies have observed CoreWeave’s success, a former Bitcoin miner that has become one of the top players in the AI industry. In its recent results, the company said that its revenue backlog jumped to nearly $100 billion.
Other Bitcoin mining companies that pivoted to the sector earlier have received large deals. IREN received a $9.7 billion order from Microsoft, and this week, TeraWulf entered a 20-year partnership with Anthropic. Core Scientific, a company that nearly went bankrupt, has seen its valuation soar to $7.25 billion.
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AI Data Center Transition Faces Major Headwinds
Investors have shorted these mining stocks because the AI data center transition is facing major headwinds. First, competition has become stiffer than ever, with SpaceX becoming the latest entrant. It has already secured major deals with companies such as Microsoft, Google, and Reflection. There are signs that Meta Platforms will move into the industry soon.
At the same time, CoreWeave and Nebius have secured large deals, making them near-duopolies. This competition means companies will struggle to secure orders from hyperscalers over time.
Most importantly, the industry is very expensive due to rising costs of servers, storage, and chips. CoreWeave is spending over $35 billion in capex this year, while Nebius plans to spend between $20 billion and $25 billion.
Analysts believe that Bitcoin miners face a $50 billion funding gap in their AI adventure. They will fill this gap by selling their Bitcoin, raising loads of debt, and diluting their shareholders.
It will also take them a long time to turn a profit because of this surge in spending and the large depreciation they will need to take. For example, in the latest results, IREN reported revenue of $144.8 million and depreciation of over $445 million.
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