One Megawatt of Power: Renting to AI Yields Twice the Profit of Mining

Among the nine major mining companies in the third quarter, three have more than half of their revenue not coming from mining, while the rest sold about 31,000 bitcoins to fund their transformation.

Written by: Blockhead

Compiled by: Chopper, Foresight News

The financial reports of publicly listed bitcoin mining companies in the third quarter should be viewed as a price signal. Electricity is being priced according to its optimal use. According to Blockhead's estimates, at the current hash rate price, renting the same one megawatt to AI generates about twice the revenue compared to using it for bitcoin mining. Among the nine companies evaluated in this article, three have more than half of their revenue coming from sources other than mining; the others are selling bitcoins on their balance sheets to fund their transformation.

This has dual implications. For the mining economy, it indicates that profits have become so thin that even with high operational efficiency, capital will exit the market. For bitcoin, it means a new class of structural sellers has emerged, and the hash rate infrastructure is shifting towards those remaining mining operators.

Two Algorithms for One Megawatt

According to MillionMiner data, the hash rate price (i.e., the revenue earned per PH/s of hash rate per day) settled at $33.18 in October, down 17.5% from $40.24 on October 1. One of the lowest-cost operators, MARA, reported a cost of $30.8 per PH/s per day, with a profit margin of about 7% at the end of October according to its own metrics. Based on its earnings call records and document summaries, the electricity cost for mining one bitcoin at its owned facilities, with an electricity price of $0.04 per kWh, amounts to $39,674.

Renting electricity to AI is a different business. Core Scientific's announcement shows that its billed electricity capacity is 485 megawatts, representing over $700 million in annual hosting revenue. This translates to about $1.44 million per megawatt per year, with an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) margin of 57%. At an energy efficiency of 15 to 20 joules per TH (terahash), one megawatt of mining corresponds to 50 to 67 PH/s, yielding an annual income of $600,000 to $800,000, from which about $350,000 in electricity costs must be deducted.

Under these assumptions, which are consistent with industry benchmarks and exclude depreciation, an AI tenant pays 1.8 to 2.4 times the revenue of mining per megawatt, with significantly more remaining after deducting electricity costs. In standard AI data center contracts, electricity costs are designed to be pass-through costs (tenants pay electricity directly in addition to rent). Thus, landlords can pocket nearly the entire rent as gross profit, while miners must first deduct their electricity bills from volatile crypto rewards.

Tenants also bear part of the construction expenses: in the first half of the year, CoreWeave paid $180.9 million towards Core Scientific's capital expenditures.

Disparities can also be seen within the same company. HIVE reported a gross margin of 34% for bitcoin mining, while high-performance computing and AI services had a gross margin of 51%, stating that the target EBITDA margin for the new GPU cluster is 80%. It also mentioned in its quarterly report that the market value of mining equipment has declined, resulting in a non-cash impairment loss of $78.7 million. The drop in ASIC prices is the second signal that the mining hardware side is being repriced.

Selling Coins to Build AI Data Centers

Another difference is the type of revenue. Mining revenue fluctuates with bitcoin prices and network difficulty: a 37% drop in the average bitcoin price wiped out $94.8 million from MARA's quarterly revenue. AI leases, on the other hand, run for 15 to 20 years. Core Scientific reported contracted revenue exceeding $24 billion, Cipher $16.6 billion, TeraWulf about $19 billion for a single campus, and Hut 8 about $26.6 billion—varying metrics that total over $85 billion.

Compared to bitcoin mining—where hardware difficulty adjustments depreciate to nearly zero every 3 to 4 years—upgraded AI facilities represent a 15 to 20-year infrastructure asset. The cost is capital intensity: converting a facility from bitcoin mining to AI leasing is a typical high capital expenditure, high return infrastructure upgrade.

Thus, the payback period is longer, but the terminal value of land and electricity assets is much higher. Core's capital expenditures in the first half of the year were $954.2 million, while IREN recorded a net loss of $263 million in its fiscal first quarter.

Regardless of what miners do, the bitcoin protocol issues about 450 BTC daily, so exiting the market does not change supply. What changes is who holds these coins and who sells them. MARA sold a total of 17,488 BTC this quarter, which is 7.8 times the 2,247 BTC it mined. MARA plans to continue selling to finance AI infrastructure and repay note obligations. Riot sold 10,599 BTC in the third quarter, while Hut 8 sold about 3,100 BTC in the third quarter and October combined. Together, these three sold about 31,000 BTC, worth approximately $2.4 billion, equivalent to 69 days of new issuance.

Miners used to sell bitcoin to pay electricity bills; now they sell bitcoin to finance capital expenditures.

Hash Rate is Retreating, Risks are Shifting

In October, miners' daily revenue ranged between $34 million and $43 million, and on November 2, the total network hash rate was about 1,069 EH/s, approximately 8% lower than the historical record. The exit situation is visible: Core Scientific's online mining machine count is nearly 50% lower than at the end of 2025, and IREN produced 402 BTC, down from 2,039 a year ago. According to Blockhead's calculations based on disclosed figures, the combined mining revenue of Core Scientific, TeraWulf, and IREN has decreased by about 84% compared to a year ago, from $334 million to about $54 million.

Core expects to complete its exit from the bitcoin business in the fourth quarter and become a pure hosting service provider by 2027. IREN also anticipates that it will "basically complete" its transformation from bitcoin mining by the end of 2026.

Remaining operators are expanding their shares: MARA's hash rate grew by 18%, and its block reward share increased from 5.0% to 5.4%.

There is a structural consequence. Every megawatt now has a reserve price for an "AI option"; convertible mining sites will only continue to mine when the hash rate price exceeds the revenue that can be earned from renting out the same electricity. This makes the lower limit of hash rate prices partially a function of AI electricity demand. Where AI wants to go, mining loses it, and difficulty adjusts to the remaining capacity. The dollar-denominated security budget still follows bitcoin prices— in MARA's case, this price is down 37% year-on-year.

This shift trades bitcoin price risk for counterparty risk and political risk. As Core Scientific's main tenant, CoreWeave reported revenues of $3.7 billion, a 168% increase, with backlogged orders of about $133 billion, and stated that it expects to finance remaining expenditures primarily through delayed withdrawals of term loans that match customer contracts. On Tuesday, its five-year credit default swaps were around 1,152 basis points, closing at 1,278 basis points on Thursday.

The hosting agreement between Core and CoreWeave covers 590 megawatts, all funded by CoreWeave. On the electricity side, U.S. energy company NRG stated that Texas electricity prices are operating nearly 40% lower than planned, and its 1.2 GW Texas data center project is on track, with an announcement expected by the end of the year; however, after the incoming Texas governor vowed to pause new data center approvals, its stock price fell 13.5% on November 4.

Analysts are cautious. Keefe Bruyette warned that there will be a "lease catalyst drought" until early 2027. Bernstein, citing Texas, has cut target prices for seven mining companies by as much as 54%. Blockhead reported in August on the roots of these two points—Wall Street is becoming more selective about which mining companies can truly implement AI, and Texas's order to audit data centers makes existing mining companies more valuable.

Next, we look at four indicators. The hash rate price against the cost of efficient mining rigs, about $31, is the first measure—below it, more capacity exits, and difficulty decreases; the second is miners' selling, as MARA has indicated it will continue to sell; the third is the pace of new leases, which is necessary for the industry's continued growth; and the fourth is the financing situation between tenants and electricity, which can be observed through CoreWeave's credit spreads and Texas policies.

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