Crypto miners are becoming a hot trade in the stock market, but it has nothing to do with crypto. Keel Infrastructure (KEEL 4.78%) is one of several crypto miners pivoting to AI infrastructure, and investors have noticed. The stock is up by 75% year to date and is approaching a $2.5 billion market cap.
Investors have seen other crypto miners like Iren (IREN 4.68%) and Cipher Mining (CIFR 5.95%) post substantial one-year gains. Keel, formerly Bitfarms, hasn't missed out with its 260% gain during the past year, but it may be due for another rally.
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Keel has a 2.2 gigawatt pipeline
Gigawatts are the name of the game when it comes to providing AI infrastructure for tech giants. The more energy a crypto miner can secure, the more annual recurring revenue it can receive once it completes the pivot to AI neocloud services.
NASDAQ: KEEL
Key Data Points
Keel has 2.2 gigawatts in its total capacity pipeline. That pipeline includes a Scrubgrass, Pennsylvania, site with a gross capacity of as much as 1.3 gigawatts, which is currently under application. The company has four additional sites that have secured power.
Iren has a 5-gigawatt pipeline, while Cipher Mining has a 4.2-gigawatt portfolio. The companies are also closing in on market caps of $20 billion and $10 billion, respectively.
Keel is positioning itself for three leases by the end of the year
Keel should have a higher market cap if you compare its gigawatt portfolio to Iren and Cipher Mining, but there are some key differences. Iren and Cipher Mining are deeper into projects and have signed lucrative deals. Keel doesn't have a big deal with a tech company yet, but that can change this year.
Keel has told investors that it expects to sign three leases this year at its three of its sites. Those AI data centers have gross capacities of 350 megawatts, 110 megawatts, and 18 megawatts.
Keel's business model is more similar to Cipher Mining's than to Iren's. While Keel and Cipher Mining create and manage AI data centers, they expect customers to bring their own AI chips. Iren, on the other hand, also buys AI chips and puts them in its facilities. That's an important distinction, since it makes Cipher Mining's recent deals a better gauge of how much Keel can earn from its infrastructure.
Last year, Cipher Mining signed a 15-year deal with Amazon for 300 megawatts of capacity. The contract's value is $5.5 billion, which comes to $367 million in annual recurring revenue.
Keel's Panther Creek facility, also in Pennsylvania, has a gross capacity of 350 megawatts, meaning it can sign a nearly identical deal with a slightly higher contract value. The other two sites are smaller but can still generate consistent revenue.
Keel expects its 96 megawatt Sherbrooke site in Quebec, Canada, to be ready for a lease in 2027. The 1.3 gigawatt Scrubgrass site will take longer if its application is approved and remains a key point of Keel's long-term growth narrative.
The company operates in a capital-intensive industry
Building an AI data center isn't cheap, and for unprofitable companies like Keel, that requires raising plenty of capital. Companies like Iren and Nebius have minimized dilution by issuing low-rate convertible bonds. Keel followed the same script last year by issuing $500 million convertible notes. The issued bonds have a 1.375% APY for bondholders and have an initial conversion price of $6.86 per share, representing more than 50% upside from current levels.
Keel told investors in its Q1 presentation that its $533 million in liquidity is enough to advance three of its sites through lease execution. Keel will have fewer costs than Iren and Nebius for its data centers since it doesn't have to worry about supplying AI chips.
AI demand isn't going away anytime soon, and Keel is in a great position. Signing big deals with tech companies will strengthen the bullish thesis. While Keel has to contend with the messy process of raising capital and expanding its AI infrastructure, it is an attractive long-term opportunity for investors who are willing to take risks.
