Bitcoin
AI is bringing big tech data centers and Bitcoin closer together
Cryptocurrency It was once the bustling sector that drove a wave of development from data centers to mining facilities, but as that boom fizzled, many of the companies and project sites are turning to support the new hot topic: artificial intelligence.
A Bitcoin mine is just a data center, but cryptocurrency mining has evolved into a separate asset class, distinct from the broader data center sector that serves cloud providers and enterprise tenants. The two industries operate with fundamentally different business models, little overlap in terms of customers, and very different location and design considerations for new ventures.
But this dynamic is changing. A wave of investment The rise of artificial intelligence by the world’s biggest technology companies is prompting struggling Bitcoin miners to turn to traditional data center tenants, shifting their business models to hosting AI computing. At the same time, growing demand for AI has led to energy shortages that are changing the mathematics of development for data center providers and tenants, pushing them into places that were once exclusively the province of cryptocurrency miners.
“Before you looked down on these Bitcoin miners who were building in these lower-tier markets,” said Sarah Keller, Uberhead of global technical sourcing and supply chain at Bisnow, speaking at Bisnow’s DICE Northwest event last month. “Now, it’s an important part of the strategy.”
The last few years have been difficult for cryptocurrency miners.
The USA experienced a crypto mining construction boom between 2020 and mid-2022, a period in which miners snapped up thousands of megawatts of power rights and launched massive development projects destined to eclipse even the largest cloud data centers in use at that time. But this wave of bitcoin mining expansion stopped abruptly in 2022 when the value of bitcoin and other digital currencies plummeted more than 64%, triggering a wave of bankruptcies and consolidation across the industry.
Although cryptocurrency prices recovered new records this spring, many of the remaining companies are still fighting to stay afloat following an April adjustment in bitcoin blockchain, an event known as “The Halving”, which cut miners’ revenues in half in an instant. A significant number of miners are expected to shut down their machines in the coming months.
However, the darkest days of “crypto winter” coincided with the emergence of a new phenomenon that some crypto miners quickly saw as a lifeline: Generative AI.
The unexpected success of OpenAIin GPT Chat at the end of 2022 a Big Tech began AI arms racewith companies like MicrosoftGoogle and goal struggling to build the data centers needed to develop generative AI and integrate it into its various products and services. AI continues to drive unprecedented data center growth as the world’s biggest companies bet billions on an AI-centric future.
But the computing behind generative AI, especially the model training systems that underpin technologies like ChatGPT, is very different from the IT equipment most data centers are designed to support. In many ways, the infrastructure needs for AI computing more closely resemble crypto mining.
Just like crypto mining, AI training utilizes high-performance, power-intensive GPU processors that use much more power and produce much more heat than traditional data center servers. Like crypto mining, AI training is not “mission critical,” meaning it does not require multiple layers of redundancy to prevent power outages or other major failures that are essential to the design of conventional data centers.
Also like cryptocurrency mining, AI training does not need the fast data transfer speeds, known as latency, that traditionally require data centers to be located in areas with robust fiber optic networks and close to other data centers and large population centers.
As mining revenues decline, a growing number of cryptocomputing companies are turning to the AI data center gold rush.
CoreWeave, a New Jersey-based company that originally focused on cryptography and blockchain computing, has managed to transformed at an AI-focused cloud service provider offering access to GPUs for AI applications. In June 2023, the company signed a deal to provide AI computing to Microsoft, in a deal that could reportedly be worth billions.
CoreScientific, once one of the world’s largest bitcoin miners until its bankruptcy following the crypto crash in 2022, is leasing 16 megawatts to CoreWeave and plans to convert more of its infrastructure to power high-performance computing for AI.
Additionally, Iris Energy indicated that it is moving some capacity from the company’s five data centers in Texas and British Columbia to host AI training, while high profile mining companies such as Hut 8, Hive, and Terawulf have ongoing AI operations or plans for AI growth.
Still, experts warn that this shift from crypto data centers to AI is easier said than done.
Real estate considerations for the two sectors are similar, but there are also important differences. Many bitcoin mining facilities will need significant upgrades and design changes to attract AI tenants – capital projects that most miners have no experience executing.
AI hosting is also a completely different business model than cryptocurrency miningand some experts fear that miners are at a significant disadvantage to those with years of experience developing the skill sets needed for customer service. placing.
Managing Partner at Barkers Point Capital Advisors Barry Kupferberg compared this pivot to the owner of a mid-range apartment building in an upscale neighborhood trying to convert the property into a Four Seasons.
“You need access to capital and expertise to execute, and it’s not clear whether these crypto mining companies have either of those two parts,” Kupferberg said. “Some crypto mining companies will be able to pivot, but some will struggle.”
While legacy cryptocurrency miners are migrating to conventional data centers, data center developers and the industry’s largest tenants are starting to think more like cryptocurrency miners when it comes to where they build data centers.
As data center development records increasingly dire power restrictions In key industry markets like Northern Virginia, Silicon Valley and Atlanta, developers are now willing to build anywhere they can find hundreds of megawatts of electricity, even if those locations lacks network connectivity or proximity to population centers that would have made them the exclusive domain of cryptocurrency miners just two years ago.
In March, Amazon Web Services announced plans for a 15-building data center campus at a nuclear power plant in remote northeastern Pennsylvania, a project directly adjacent to a TeraWulf crypto mining facility. Over the past two years, AWS has launched a series of large-scale data center projects in rural locations such as Madison CountyMississippi and Louisa CountyVirginia.
Google and Microsoft also have major projects underway in locations far off the traditional data center map, in places like Mount PleasantWisconsin and Fort Wayne, India. And social media giant Meta announced this month which will develop an AI data center in Wyoming.
More and more, hyperscale Developers’ quest for power is leading them to undeveloped sites owned by crypto miners themselves, data center executives say.
The crypto gold rush that began in 2020 saw a flood of miners and speculators snapping up thousands of acres of land and securing grid interconnection deals with utility companies for thousands of megawatts of electricity. But much of this land and capacity remains undeveloped.
Now data center developers are keeping an eye on these sites. With wait times for new network connections from utilities now extending up to up to seven yearshyperscalers desperate for new capacity are willing to pay a significant markup to acquire sites where they can access power relatively quickly.
“There are miners that had ongoing development projects or additional capacity on their existing interconnects and are now looking at the premium that data center and hyperscale developers will pay to bring the projects online to reach their 20 gigawatts or 30 gigawatts. development goals,” said Austin Storms, co-head of mining at crypto-oriented financial services firm Galaxy.
“They are looking at this and thinking it might be prudent to sell some capacity or sell a development project while the economics of Bitcoin mining are very bad after the halving.”
Although third-party developer Tract recently is planning on a 2,200-acre campus in Nevada, at a site acquired from crypto firm Blockchain LLC, few such transactions have emerged so far. But Storms believes a series of large-scale acquisitions of crypto mining assets will be executed before the end of the year, including the sale of existing mining facilities – a trend that could accelerate if economic conditions drive greater consolidation in the mining industry. cryptographic.
“Hyperscalers are hanging around some of these mining facilities that have a lot of power,” Storms said. “It’s starting to heat up in the last few months. We haven’t seen many of these transactions execute, but I think there are a significant number in the pipeline that we will likely see in the coming months.”