Artificial intelligence (AI) chips are a foundational component of the AI boom, but they aren't the only input that makes this technology possible. Discovering different parts of the AI bottleneck can lead to lucrative investment opportunities like Cipher Mining (CIFR +6.33%).
This crypto miner pivoted to AI infrastructure and has signed long-term deals with some of the leading tech companies. It has AI data centers and a multigigawatt pipeline that can propel long-term growth.
The xAI data center ruling is a major tailwind for Cipher Mining
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AI data centers are a significant part of the AI bottleneck since they are uniquely equipped to handle intense workloads. Traditional data centers aren't well-suited to AI apps, which is why tech giants are signing long-term deals with Cipher Mining.
Although those deals have been catalysts for a while, a recent ruling around xAI's Memphis data center is another tailwind for Cipher Mining. The Environmental Protection Agency ruled that Elon Musk's AI company illegally bypassed rules by using methane gas turbines to power its data centers at the expense of higher pollution in the city.
Cipher Mining relies on renewable energy for its data centers, making it compliant with this rule. While Cipher Mining does not yet have an AI data center in Tennessee, other states may pass laws similar to those in Tennessee that make it more difficult for gas-powered AI data centers to operate.
Not only is it a setback for competitors seeking to use gas turbines in their AI data centers, but it also presents an immediate issue for xAI. The company may have to strike a deal with Cipher Mining for additional AI capacity.
Cipher Mining already has a solid trajectory
The xAI news is a big bonus for Cipher Mining investors, but the company has been delivering a barrage of wins for long-term shareholders.
The company signed a 15-year deal with Amazon valued at $5.5 billion and totaling 300 megawatts. Cipher Mining has more than 3 gigawatts in its pipeline, giving it the flexibility to support at least nine more deals like the Amazon agreement. Cipher Mining also signed a 10-year deal with Fluidstack, which is backed by Google.
NASDAQ: CIFR
Key Data Points
While the stock is gaining momentum that should extend as AI demand heats up, it may go parabolic in 2028. That's the year 2.5 gigawatts become fully energized and available for AI workloads. However, tech companies will likely secure some of those gigawatts before they are online.
The demand for AI won't slow down anytime soon. There is a significant energy shortage. Deloitte projects that demand for U.S. AI data center gigawatts will increase by more than 30-fold to 123 gigawatts by 2035. Companies like Cipher Mining are in a prime position to address this strong demand and serve as the backbone of AI infrastructure.
