The Insane Value of POWER ACCESS: Judging Bitcoin Miners By Their Megawatts -- Too Cheap To Ignore?
5 days ago•Beat The Denominator•@BeatTheDenominator
YouTube15 min 27 sec
Quick Insights

Consider investing in select Bitcoin miners as an undervalued play on the AI boom, as their secured power contracts are attractive to power-hungry AI companies. Marathon Digital (MARA) is highlighted as the most undervalued opportunity, with its power infrastructure valued at a significant discount of just $0.29 million per megawatt versus an estimated market cost of $1.5 million. Hut 8 (HUT) is presented as another deeply undervalued option for investors seeking exposure to this theme. For those who prefer a balance of value and quality, Riot Platforms (RIOT) and IREN (IREN) offer attractive valuations combined with more modern mining equipment. The core strategy is to gain exposure to these companies before the market fully recognizes the value of their power access in an AI-driven world.

Detailed Analysis

Investment Theme: Power Access as a Valuation Metric for Bitcoin Miners

The central thesis of the podcast is that Bitcoin miners should be valued not just on their mining capacity (exahash) or Bitcoin holdings, but on their access to cheap, secured power. This power access, secured before the AI boom, is presented as a massively undervalued asset that could be attractive to AI companies facing power shortages.

The analyst proposes a valuation metric: (Market Cap - Bitcoin Holdings) / Megawatts of Power. This isolates the market value being assigned to the company's operational infrastructure and power contracts.

Takeaways

  • Core Idea: The market may be overlooking the immense value of the power contracts held by Bitcoin miners. As AI companies desperately seek power, these miners could become acquisition targets (M&A) not for their mining operations, but for their grid access.
  • Valuation Discrepancy: The analyst estimates the "real world" cost to develop a megawatt of power is at least $1.5 million. Several miners are trading at a significant discount to this figure based on their power capacity, suggesting they are undervalued.
  • Investment Strategy: Consider investing in Bitcoin miners as a "picks and shovels" play on the AI boom, specifically targeting those with the lowest valuation per megawatt.

Marathon Digital (MARA)

  • MARA is presented as the most significant example of being undervalued based on its power access.
  • The market is giving "no premium" to its power contracts. The analysis calculates its valuation at $0.29 million per megawatt for its future potential (3 gigawatts) and $790,000 per megawatt for its currently developed sites.
  • This is a steep discount compared to the analyst's estimated open-market cost of $1.5 million per megawatt.
  • A potential buyer could acquire MARA for its 3 gigawatts of power for an effective price of $860 million (after selling its Bitcoin holdings), whereas building that capacity from scratch could cost $4.5 billion.
  • A noted drawback is that MARA's mining equipment is older ("the old stuff") and less valuable than competitors'.

Takeaways

  • Bullish Sentiment: MARA is highlighted as being "insanely cheap" and offering "a huge discount" if valued on its power infrastructure.
  • Primary Play: MARA is positioned as the top value play for investors who believe in the "power for AI" thesis. The potential upside is based on the market re-rating the value of its power contracts or an acquisition by a company needing power.
  • Risk Factor: The company's mining fleet is less modern, which could be a drag on its valuation compared to peers with state-of-the-art miners.

Hut 8 (HUT)

  • Alongside MARA, HUT is described as one of the "least valued stocks" based on the power access metric.
  • The analysis pegs its valuation at $0.43 million per megawatt for future potential or $1 million per megawatt for currently developed sites.
  • This valuation is still a "good third cheaper" than the analyst's estimated open-market cost.

Takeaways

  • Bullish Sentiment: HUT is considered "very cheap" and presents a similar value proposition to MARA.
  • Actionable Insight: For investors looking for exposure to the power access theme, HUT is presented as another deeply undervalued option alongside MARA.

Riot Platforms (RIOT)

  • Riot is mentioned as being "cheap" on a power-access basis, but "definitely not the cheapest" when compared to MARA and HUT.
  • Unlike MARA, Riot is noted as having modern miners which are "worth a lot of money."
  • The company holds convertible debt, which the analyst treats as future shareholder dilution rather than traditional debt.

Takeaways

  • Moderately Bullish Sentiment: Riot is an attractive, but not the most deeply discounted, play on the power access theme.
  • Quality Play: Investors might prefer Riot over cheaper peers due to its more valuable, modern mining equipment, which provides an additional layer of asset value.

IREN (IREN)

  • IREN is highlighted for its growth potential, with the "second biggest growth in power anticipated at 345%."
  • Like Riot, it is considered "cheap" but not as cheap as MARA or HUT. Its future potential is valued at $1.29 million per megawatt.
  • IREN is also noted for having valuable modern miners.

Takeaways

  • Growth-Oriented Play: IREN is positioned as an investment for those looking for significant growth in power capacity.
  • Balanced Value: It offers a blend of a reasonable valuation on its power access and the quality of having a modern mining fleet.

CleanSpark (CLSK)

  • CleanSpark is described as "a little expensive as far as power access goes" compared to its peers.
  • The analyst could not find publicly communicated plans for significant power expansion, which limits its "future potential" valuation in this analysis.
  • It is noted for having valuable modern miners.
  • A past acquisition by CleanSpark is used as a benchmark: they paid $155 million for 400 megawatts, which the analyst uses to justify a market price of around $2.5 million per megawatt.

Takeaways

  • Bearish/Neutral Sentiment (on a power-value basis): Based purely on the power access valuation metric, CleanSpark appears more fully valued or slightly expensive.
  • Alternative Value: The company's value may be better reflected in the quality of its operations and modern mining fleet rather than in deeply discounted power contracts.

Nebius

  • Nebius is presented as an outlier and looks "very expensive" and "not good at all" on the power access spreadsheet.
  • The analyst states that Nebius's value is not derived from its power infrastructure.
  • Its valuation is instead based on:
    • Its venture capital projects, like its stake in ClickHouse.
    • Its partnership with Nvidia and hyperscalers.
    • Its software and the CEO's relationships with Big Tech.

Takeaways

  • Different Thesis: Nebius should not be evaluated as a power infrastructure play.
  • Actionable Insight: Investors interested in Nebius should analyze it as a tech/software/VC company, focusing on its partnership with Nvidia and the success of its software services, rather than its physical assets.
Video Description
Join Patreon for Exclusive Perks: https://www.patreon.com/btdenominator Beat The Denominator is a channel whose goal is to Beat the dollar's inflation (i.e., beat the denominator). Therefore, I don't cover just inexpensive stocks: I also cover Bitcoin derivative stocks such as Bitcoin miners as viewed thru the lens of AI and the value of their power access. In today's video, I assess how many megawatts do IREN stock, MARA stock, RIOT stock, CLSK stock, HUT stock, NBIS stock, and CORZ stock have access to, and whether these megawatt accesses are reflected in their current valuation. This is NOT FINANCIAL ADVICE! As always, this video is NOT investment advice, and none of the contents should be construed as such. I do not make short-term or long-term price predictions for any stock investment, and all words spoken in this video are for entertainment purposes ONLY.
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