Analysis: Bitcoin decline and 5.705% Treasury yield pressure neocloud stocks

Former bitcoin miners that became AI data-center landlords faced pressure Thursday from falling bitcoin prices and rising long-term borrowing costs for debt-funded buildouts. Cipher Digital, Riot Platforms, CleanSpark, IREN, TeraWulf, Nebius Group and Applied Digital shares all traded lower in the morning session. Most of those stocks were roughly 50% or more below their 52-week highs. Benzinga Pro data showed neocloud stocks continuing to decline in late-morning trading.

Trading Economics reported that the 30-year Treasury yield rose more than 4 basis points to 5.705% Thursday morning. The yield had traded just below a 24-year high in the prior session. The 10-year Treasury yield touched its highest level since 2002 on Wednesday. Minutes from the latest Federal Reserve meeting showed that officials expect to raise rates again before year-end. Investors are betting on a rate increase on December 9.

Higher yields increase borrowing costs for neocloud companies and reduce the present value of long-term lease income. Blue Owl Capital led a $2.4 billion financing package for an IREN AI campus in Canada. The package included a $1.2 billion senior secured term loan. The package also included $1.2 billion of senior secured notes to buy Nvidia equipment. Reuters reported that IREN needs to spend $5.8 billion on chips under a $9.7 billion Microsoft contract. Reuters reported that IREN needs to spend another $3 billion on other costs under that contract. Reuters reported that IREN has lined up $3.7 billion in chip financing.

Benzinga Pro data showed bitcoin trading near $82,496 midmorning, down about 0.9%, after falling as low as $81,710. Bitcoin was down roughly 35% from its 52-week high of $126,296. Riot Platforms and CleanSpark still depend heavily on mining revenue. A weaker bitcoin price reduces mining margins while AI hosting businesses are still expanding.

Valuations add to the pressure on neocloud companies. Reuters described Cipher, TeraWulf and Hut 8 as landlords providing powered buildings and signing leases lasting as long as 15 years. Long leases with built-in rent increases appear safe. However, rising yields reduce the present value of lease income more severely when that income extends further into the future.