Avi Salzman — Data Center Politics Could Help an Unlikely Industry: Bitcoin Miners

To run a data center you need a physical connection to the electricity grid, and getting one takes years — you apply, you wait in a queue, and a state regulator eventually says yes. Several states have just stopped saying yes: New York has a moratorium, Texas is auditing the industry, Pennsylvania now demands you bring your own power plant. That is why the utilities that were going to sell electricity to all those new data centers have sold off.

Bitcoin miners went through that same queue years ago, for a different reason: mining crypto also means running warehouses full of hot computers that eat enormous amounts of power. They already have the connection. Over the past two years many of them have been converting those warehouses into AI data centers — renting out the electricity, or the building itself, to a tech company. That income is steadier than mining Bitcoin, which is why their share prices started moving with AI stocks instead of with crypto.

Morgan Stanley's Stephen Byrd says the market has now punished them for the wrong reason. The moratoria block new hookups; they do not switch off power already flowing to a site that is built. So the miners are being sold as if they were exposed, when in fact the rule that hurts everyone else makes the one thing they own — a live grid connection — harder for anyone else to get. In his words, all those cancellations and delays "just makes these companies' sites more valuable." Cipher is the first name on his list.

Hut 8 is the same trade as Cipher: a Bitcoin miner turning its power-hungry warehouses into AI data centers and collecting rent instead of crypto. The valuable asset is not the mining machines, it is the site — land with a large, already-approved electricity supply attached to it.

Think of it as owning a warehouse with a rail spur in a year when the government stops issuing permits for new rail spurs. Nothing about your warehouse changed; everything about its scarcity did. That is the whole of Byrd's argument, and it is the exact inverse of how the stock has traded over the past month.

Galaxy sits in Byrd's list of five because it belongs to the same category: a crypto-native company that ended up owning large amounts of contracted electricity and is now selling that power to AI tenants. The article groups it with the miners rather than treating it as a financial firm, because for this argument the only thing that matters is whether you already control connected megawatts.

The caution worth keeping is that the five names are not interchangeable — they differ in how much of their value is the installed site versus the expansion pipeline that still needs approvals. Byrd's call protects the first and not the second.

MARA is one of the largest of the miners, and it illustrates the mechanism the article describes: as these companies shifted toward renting power and buildings to tech tenants, "their stocks have traded like AI names." That worked well while AI power was the hottest theme in the market. It worked badly for the past month, when states started freezing grid approvals and everything with an AI-power label fell together.

Byrd's point is that this is a correlation, not an exposure. The political risk lands on projects that still need a permission slip. A miner's existing halls already have theirs. If he is right, the last month's selloff is the entry, not the warning.

Riot is the last of the five, and it is where the article's one caveat is worth attaching. Byrd concedes that "some new Bitcoin-to-AI projects in states like Texas may see delays" — and Texas is exactly where the large miners have concentrated, because power there was cheap and interconnection was fast.

So split the company in two when you underwrite it. The megawatts already energised are the protected, appreciating asset. The megawatts still on the drawing board face the same audit and the same queue as any hyperscaler's greenfield. The bull case rests on the first half being worth more than the market currently pays for the whole.

Constellation owns power plants and had been selling — or hoping to sell — their output to new data centers at premium prices. That is the business the backlash suspends. If governors will not approve the data center, the contract to supply it never gets signed, and the stock gives back the value the market had already attached to those future deals.

This is the same loss described in the Pennsylvania piece five days earlier, where Talen, Vistra and PSEG were the named losers: the plant keeps running and keeps selling into the market, but the option on a specialised, high-priced data-center contract is what disappears. In this article Constellation is named as the illustration of the damage rather than analysed on its own — the point of the piece is who benefits from that damage.

NRG is the second power-plant owner named as hurt by the slowdown, for the identical reason: its data-center growth story requires new data centers to be built, and governors from New York to Texas have started refusing or deferring them.

Held next to the miners, it makes the structural point of the article clean. Two companies can both be "AI power" and be on opposite sides of the same rule. The one that needs a new project approved loses; the one that already has the connection and can rent it out gains, because the approval freeze is a supply cut on its competition.

This exchange-traded fund holds a basket of the mining and digital-power companies, so its price is a quick read on the whole group. The article cites it for one number: down 16% over the past month, as states paused grid approvals.

It is not recommended — it is the evidence that the dislocation Byrd is describing actually happened. If his thesis is that the entire category was sold for a risk that only applies to part of it, then the basket is where the mispricing is most visible, and also the crudest way to own the recovery, since it will not distinguish the miners with protected installed sites from those whose value sits in an unapproved pipeline.