Analysts at research and brokerage firm Bernstein have initiated coverage on Core Scientific and IREN with an outperform rating, citing the firms’ hybrid bitcoin mining and AI data center strategies.

“Bitcoin BTC +1.61% miners are emerging as attractive partners to build out AI data centers with ‘ready power interconnect’ and data center operating capabilities,” Bernstein analysts Gautam Chhugani and Mahika Sapra wrote in a note to clients late Tuesday.

Core Scientific’s 12-year deal with AI firm CoreWeave last month, projecting $3.5 billion in total revenue, and IREN’s Nvidia GPU deal with AI startup Poolside in February were key catalysts, the analysts said.

In June, JPMorgan said investor interest was “surging” for bitcoin miners following Core Scientific’s AI hosting deal. IREN also raised $413 million to fund its bitcoin mining expansion earlier this month

The Bernstein analysts have a price target of $17 for Core Scientific, 64% to the upside, and $26 for IREN, 78% to the upside. Core Scientific and IREN shares closed down 7.7% at $9.56 and 12.4% at $12.82, respectively, on Tuesday, according to TradingView.

They reason that Core Scientific, a firm that only entered out of bankruptcy in January, now leads the bitcoin miner AI data center co-hosting model, while IREN has one of the strongest power pipelines and data center operations capabilities.

The analysts previously initiated coverage on bitcoin miners Riot Platforms, CleanSpark and Marathon in late 2023, based on the premise of a new bitcoin bull cycle and rising consolidation in the industry post-halving.

“Bitcoin miners enjoy a lead in the ‘large load’ power interconnect queue vs. approval queue of more than 4 years for greenfield buildouts, thus saving ‘time to market,’” the Bernstein analysts said, with a pipeline of power access projected to double by the end of 2027.

Bitcoin mining facilities are also “ideal” to retrofit for AI due to their high power density racks, cooling infrastructure and data center operating capabilities, Chhugani and Sapra added.

Bernstein expects 20% of bitcoin miners’ power capacity to pivot to AI by the end of 2027, led by bitcoin mining and AI hybrid firms like Core Scientific, IREN and Hut 8. The analysts also project other large bitcoin miners to follow as the top five U.S miners continue consolidating toward 25% of the Bitcoin global hashrate capacity, alongside AI monetization.

In June, Chhugani and Sapra raised their price target for bitcoin to $200,000 from $150,000 by the end of 2025, driven by expectations of unpreceded demand via the spot Bitcoin ETFs and bitcoin miner marginal cost of production modeling. Ultimately, the analysts target bitcoin to reach $500,000 by the end of 2029 and $1 million by 2033.

Reiterating those targets to clients on Tuesday, the Bernstein analysts said the market was currently penalizing miners for bitcoin’s volatility, despite their expectation of a long-term bitcoin structural uptrend led by growing institutional adoption.

“Bitcoin miners are being undervalued for their ‘strategic power portfolio’ and monetisation option into AI data centers, in a ‘power’ constrained world,” they wrote. “We believe AI revenue line provides a downside floor to the miners, with bitcoin driving cyclical upside.”

Gautam Chhugani maintains long positions in various cryptocurrencies.

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