Marathon Digital Bets Its Bitcoin Mining Power Assets Can Fuel AI Data Center Growth

Key Points

• Interested in Marathon Digital Holdings, Inc.? Here are five stocks we like better.

• Marathon Digital is shifting from bitcoin mining toward AI and high-performance computing infrastructure by leveraging its ownership of land, power, and data center assets. CEO Fred Thiel said the strategy has been developing for more than two years.

• The company has more than 1.1 gigawatts of energized power and sees many of its sites as attractive to hyperscalers, neoclouds, and enterprise AI customers. Marathon also says its capacity could grow beyond 2 gigawatts with expansions and the pending Long Ridge deal.

• Thiel said Marathon currently prefers a real estate and leasing model over GPU-as-a-service because it has better economics and lower capital burden. Near-term priorities include signing tenant leases and closing the Long Ridge transaction, which management says could be a major shareholder value driver this year.

Marathon Digital (NASDAQ:MARA) Chairman and Chief Executive Officer Fred Thiel said the company’s push into AI and high-performance computing infrastructure has been a multiyear process built on its experience aggregating low-cost power and data center capacity for bitcoin mining.

Speaking at TD Cowen’s 54th Annual CMT Conference in a fireside chat with communications infrastructure analyst Michael Elias, Thiel said MARA’s strategy evolved from an asset-light bitcoin mining model into ownership of land, power and data center assets. He said that shift positioned the company to evaluate AI infrastructure opportunities as demand for power-constrained computing capacity accelerated.

From Bitcoin Mining to Power Ownership

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Thiel said MARA originally focused on bringing compute to hosted bitcoin mining sites rather than owning the underlying infrastructure. That approach made sense when the company could devote more capital directly to mining machines, he said.

But by 2023, after stress in the bitcoin mining sector, MARA was able to acquire “70% of all the capacity where we operated at less than replacement cost,” Thiel said. Those purchases gave the company ownership of land and power at many of its operating sites.

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Thiel said MARA later added power assets, including a wind farm, and began mining using flare gas in oil fields. He also pointed to a 250-megawatt deal in the United Arab Emirates, where MARA developed two data centers in Abu Dhabi that use immersion liquid cooling and operate without air conditioning.

“All the types of technologies you need to use for AI in the future,” Thiel said.

AI Strategy Centers on Leasing Power-Backed Sites

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Thiel said MARA began looking seriously at AI opportunities in 2023 and 2024. While hyperscale cloud companies require highly specialized data center designs, he said MARA determined it would need a partner rather than building an entire tenant-leasing and development organization on its own.

The company hired a third-party adviser to evaluate which of its sites would be attractive to hyperscalers and what upgrades would be needed. Thiel said the results showed that “the vast majority” of MARA’s sites were attractive to potential counterparties.

MARA then developed a partnership framework with Starwood, which Thiel said was finalized in February after the companies tested customer interest together. He described the process as more than two years in the making.

Thiel said MARA has more than 1.1 gigawatts of energized power in its current portfolio. Sites of 100 megawatts or more are drawing interest from hyperscalers, while smaller sites are more likely to appeal to neocloud and inference AI providers, he said. He added that site expansion potential could take MARA’s capacity above 2 gigawatts, including growth at existing locations and the Long Ridge deal the company has announced but not yet closed.

Company Favors Real Estate Model Over GPU-as-a-Service

Asked whether MARA would provide GPU-as-a-service or own compute infrastructure itself, Thiel said the company currently sees better economics in data center real estate development and leasing.

He said building a 100-megawatt site for a neocloud model could require roughly $100 million of infrastructure and $300 million of compute, creating a much heavier capital burden. By contrast, through the Starwood partnership, MARA can contribute sites to a joint venture and receive equity credit before it must contribute additional capital.

“You can’t be all things to everybody,” Thiel said. “We think that right now we have a portfolio that will do very well in a leased environment.”

He said longer term, MARA could pursue partnerships with silicon vendors on smaller sites, with MARA operating infrastructure while partners provide chips. Over time, he described the possibility of large data center campuses with hyperscalers, neoclouds and owned-and-operated components.

Demand Spans Hyperscalers, AI Labs and Enterprises

Thiel said the AI infrastructure demand environment remains constrained by power availability. He said conversations are occurring with silicon providers, model providers, hyperscalers, neoclouds and enterprises.

Model providers such as OpenAI and Anthropic are competing for market share that depends on available compute capacity, Thiel said. He also said silicon vendors are increasingly focused on securing access to powered sites for their customers.

Thiel described enterprise demand as a developing long-term opportunity, particularly for private cloud infrastructure. He said enterprises may seek dedicated AI environments to reduce costs and maintain control of sensitive data. He cited MARA’s investment in Exaion in France as relevant to that opportunity, saying Exaion’s business includes private cloud infrastructure and that data sovereignty concerns in Europe create openings for non-U.S. cloud alternatives.

For enterprise customers, Thiel said expected demand is more likely in the 5-megawatt to 25-megawatt range, and generally below 50 megawatts, while some large financial institutions may seek much larger footprints.

Priorities: Tenant Leases and Long Ridge

Thiel said MARA’s near-term priorities are signing tenant leases for its existing portfolio, closing the Long Ridge transaction and leasing that capacity.

“If we do all of that this year, it will be a very great year for our shareholders,” he said.

On financing, Thiel said tenant creditworthiness is critical because lower-cost capital matters in data center development. He said the Starwood partnership provides a “credit wrap” benefit, and that working with non-investment-grade AI companies would likely require backstops, potentially from silicon providers.

Under the Starwood structure, Thiel said MARA contributes a site only once it is leased. He said Starwood must catch up to MARA’s contributed value before MARA writes another check, and that cost overruns are not borne on MARA’s balance sheet. He also said MARA can continue bitcoin mining at a site until a tenant requires the space, after which the company can move its containerized mining infrastructure.

Thiel said MARA may eventually choose to sell stabilized data center assets and recycle capital, or continue holding them for cash flow. He said the model is designed to allow the company to keep aggregating land and power for future projects.

About Marathon Digital (NASDAQ:MARA)

Marathon Digital Holdings, Inc is a digital asset technology company specializing in the mining and acquisition of bitcoin. Headquartered in Las Vegas, Nevada, the firm employs high-performance application-specific integrated circuit (ASIC) miners and proprietary software to secure the Bitcoin network and expand its crypto-mining footprint. Marathon Digital focuses on operational efficiency and scalability, while maintaining rigorous standards for regulatory compliance and corporate governance.

The company operates multiple large-scale mining facilities throughout North America, including sites in Texas, Montana and New York.

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