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Bitcoin (BTC) is currently priced at $87,365, and mining stocks have taken a hit after reports surfaced that Microsoft had abandoned plans to invest in new artificial intelligence data centers in the US and Europe. This decision was made due to concerns over a potential oversupply of AI infrastructure, as per a Bloomberg report and data from Google Finance.
Shares of crypto miners such as Bitfarms, CleanSpark, Core Scientific, Hut 8, Marathon Digital, and Riot dropped by 4% to 12% following the announcement. These stock declines underscore the growing reliance of cryptocurrency miners on business from AI models, particularly after Bitcoin's April 2024 “halving,” which reduced mining revenues.
Mark Palmer, a stock analyst at Benchmark, noted that investors had already factored in Microsoft’s data center cuts. He pointed out that the price drop in mining stocks seemed to be more influenced by stagnation in Bitcoin's price than any other factor. This, combined with investor fatigue as mining difficulty levels remain high, is contributing to the slump.
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Source: Google Finance
Miners are diversifying into AI data-center hosting to boost revenue and repurpose existing infrastructure for high-performance computing, according to Coin Metrics in a March report. For example, Core Scientific committed 200 megawatts of hardware capacity in June 2024 to support CoreWeave's AI workloads.
In August 2024, asset manager VanEck said that Bitcoin mining stocks could see a market cap increase of approximately $37 billion if they heavily invest in AI infrastructure.
However, miners are facing challenges this year due to declining crypto prices, which are exacerbating the difficulties caused by the April halving. JPMorgan, in its March report, also highlighted that the weakening demand for AI data centers could add additional strain on the sector.
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Source: VanEck
Microsoft's shift in strategy was further confirmed on March 26 by analysts at TD Cowen, who reported that Microsoft scrapped plans to build several new data centers, which would have required around 2 gigawatts of power. according to Bloomberg.
This move was attributed to an oversupply of computing capacity for AI models and a reduction in planned collaborations with OpenAI, the maker of ChatGPT.
In the past six months, Microsoft has canceled several data center leases and postponed plans to add more capacity. The company is expected to slow its data center investments further in the second half of 2025, as it finishes an $80 billion buildout and focuses on upgrading existing centers with new hardware and equipment.