Bitcoin miner MARA warns AI mirrors 2000s internet boom, firms risk overbuilding infrastructure: Bernstein
2024-10-17

In a recent interview with analysts at research and brokerage firm Bernstein, Fred Thiel, CEO of bitcoin miner MARA (formerly Marathon Digital), said the current AI environment resembles the early 2000s internet boom — and many companies, particularly smaller players, risk overbuilding infrastructure without sufficient demand.
This could lead to potential financial difficulties if clients cannot generate revenues, Bernstein digital assets lead Gautam Chhugani wrote in a Thursday note to clients.
However, Thiel did not rule out the benefits of the emerging niche, suggesting that successful bitcoin miners will increasingly integrate AI into their operations, leveraging low-cost energy and becoming “energy partners” to AI data centers and hyper scalers — in the long term.
Bitcoin miners’ strategies have diverged considerably in 2024, with the stocks of AI diversifiers like Core Scientific, IREN and Terawulf outperforming their pure-play bitcoin mining counterparts.
AI diversifiers have benefitted from increasing demand for high-performance computing and AI data center hosting services, given their valuable power contracts pipeline. However, pure-play firms have argued the return on bitcoin mining’s cheaper infrastructure and faster energization is far quicker than AI gestation periods, especially amid a potential bull run for the foremost cryptocurrency.
Despite his warning, Thiel’s long-term view is an interesting shift for the pure play operator that has transitioned from an asset-light miner to consolidating 54% of previously third-party hosted capacity. It also mirrors recent comments from rival bitcoin miner Riot Platform’s CEO Jason Les, who said the firm would be open to considering AI opportunities if the right partner and deal structure came along.
Consolidation, diversification and an ownership interest in Auradine
On the bitcoin mining side of things, Thiel said the company’s objective was to eventually own 100% of its mining capacity, helping to reduce its costs and improve profit margins.
MARA is currently focused on on-site power generation using stranded/flare gas. That gives the company an advantage in terms of acquiring gas at much lower rates compared to the energy grid — saving on costs and avoiding curtailment issues.
“We really want to be able to maximize the amount of bitcoin we're collecting,” Thiel said. “Because if I can mine bitcoin at zero energy cost, my cost to acquire bitcoin is substantially lower than anybody else in the industry, including Michael Saylor.”
MARA also has an ownership interest in the bitcoin mining manufacturer Auradine, where Thiel serves as a member of its board of directors. MARA participated in Auradine’s $81 million and $80 million Series A and Series B funding rounds and previously acquired $35.5 million in Auradine preferred stock.
The collaboration gives MARA access to proprietary chip technology, helping it to develop custom miners optimized for immersion cooling, improving operational efficiency and reducing reliance on external suppliers such as Bitmain, MicroBT and Canaan.
However, Thiel also acknowledged that modular data centers powered by flare gas were also particularly suited to inference AI as demand picks up over time, due to their flexibility and scalability. MARA is also aiming for 50% of its revenue to come from non-bitcoin mining and offshore operations within the next four years, designed to create a diversified technology company that can “transform energy into value.”
Gautam Chhugani maintains long positions in various cryptocurrencies.
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