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Investing.com -- In a note Tuesday, Piper Sandler analysts argued that the recent sell-off in Bitcoin mining stocks, triggered by the DeepSeek AI announcement, is overdone and presents a buying opportunity.
Bitcoin miners, including HUT, RIOT, and GLXY, saw an average 16% decline on Monday as investors reassessed the AI industry’s capital expenditure needs.
However, Piper Sandler believes the market’s reaction may have been excessive, emphasizing that the underlying catalysts for Bitcoin miners remain intact.
The analysts highlight that Bitcoin miners’ AI-related value lies in their "immediate access to power" and the opportunity to sell that power to AI companies.
They believe the DeepSeek revelation will likely "accelerate the ’AI arms race’ among US AI companies," which still face significant power needs for data center expansion in the short term.
"We do not believe this will materially impact AI’s short-term power needs," they added, suggesting that AI companies will move to secure power assets sooner rather than later.
Piper Sandler also noted the long-term attractiveness of Bitcoin miners’ data center assets, citing Jevons’ Paradox, which posits that efficiency gains in technology often lead to increased net demand.
As AI and GPU efficiency improves, the analysts expect "increased demand for compute and the requisite power alongside efficiency gains."
The report reiterates Piper Sandler’s bullish outlook on the broader crypto sector, driven by their optimism on Bitcoin prices and a favorable regulatory environment under the current administration.
They argue that miners’ access to power in 2025-2026 will remain valuable to hyperscalers, who could strike deals with miners as a cost-effective way to meet power needs amid a rapidly evolving competitive landscape in AI.
“In our coverage universe, we continue to like HUT, RIOT & GLXY-CA for investors looking to gain exposure to crypto & AI / HPC,” concluded Piper Sandler.