KBW has taken a cautious view on the bitcoin mining sector, warning that the industry’s pivot toward artificial intelligence (AI) and high-performance computing (HPC) could take longer to yield returns than investors anticipate.

In research notes published Monday, KBW analyst Stephen Glagola downgraded Bitfarms (BITF), Bitdeer (BTDR), and HIVE Digital (HIVE) from outperform to market perform. While the move into AI and HPC hosting remains strategically appealing, Glagola said execution challenges, long development timelines, and capital-intensive requirements make near-term monetization uncertain.

Following the 2024 bitcoin halving, which compressed mining margins to record lows, miners are repositioning as digital infrastructure providers. By converting existing “warm shell” facilities — sites already equipped with high-density power and cooling — into AI-ready data centers, companies hope to replace volatile mining revenue with steadier enterprise contracts.

KBW cautioned, however, that the transition is complex. HPC operations require strict uptime and significant upfront investment, creating a sharp divide between operators who can successfully retrofit facilities and those at risk of underutilized or stranded assets.

Bitfarms: Market expectations already priced in

Bitfarms was downgraded as KBW noted that optimism around its 120-megawatt Sharon, Pennsylvania, site is largely reflected in the stock price. Glagola raised his price target to $3.00 from $2.50 but does not expect a binding lease agreement until the second half of 2026. He also flagged uncertainty around the company’s potential AI cloud expansion in Washington state and growing leverage. Shares were little changed in early trading.

Bitdeer: Growth offset by uncertainty

Bitdeer’s price target was cut sharply to $14 from $26.50. While KBW acknowledged Bitdeer’s progress toward becoming a leading public miner by 2026 via its Sealminer technology, the firm warned that its expanding focus on AI cloud adds execution risk. The analyst cited Bitdeer’s small scale, concentrated ownership, and related-party exposure as reasons for caution. Shares were modestly higher at $13.91.

HIVE: Competitive edge in question

HIVE Digital saw its price target reduced to $3.50 from $11.00. KBW questioned whether its AI cloud strategy offers a durable advantage, noting the company’s reliance on partner channels and equipment financing compared with pure-play data center competitors. HIVE’s negative pre-tax return on invested capital suggests the company is expanding hashrate without generating sufficient operating returns. Shares were up 0.3% at $3.04.

Overall, KBW’s message is clear: transitioning from bitcoin mining to AI-focused data centers is capital-intensive, slow to monetize, and likely to demand more patience — and potential dilution — than the market currently expects.