Bitcoin
Struggling Bitcoin Miners Seek Deals with AI Firms
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Bitcoin miners are rushing to sign deals with artificial intelligence developers in a bid to revive their dwindling revenues by finding new customers for their vast data centers.
Cryptocurrency miners run powerful computing sites, often covering acres of land, where they solve complex mathematical puzzles to authenticate transactions and produce digital coins. But with high energy and computing costs, and mining rewards having recently halved, many are struggling to turn a profit.
They are now hoping to benefit from a surge in demand for powerful but scarce chips — known as graphics processing units, or GPUs — that are used in both cryptocurrency mining and AI processing. Tech companies are racing to gain access to GPUs from chipmaker giant Nvidia as they try to build more capable AI systems, and they are increasingly making deals to let them use miners’ chips or put their own chips in miners’ data centers.
Core Scientific, one of the world’s largest bitcoin miners, is “aggressively pursuing” AI deals, Chief Executive Adam Sullivan told the Financial Times. “It’s an incredibly important part of the business,” he added.
© Elijah Nouvelage/Bloomberg
The Nasdaq-listed mining company, which has data centers in Texas, North Carolina and Georgia, struck a deal with AI cloud provider CoreWeave last month that the companies estimate will be worth $4.7 billion in revenue over 12 years. Nvidia-backed CoreWeave — itself a former cryptocurrency miner that pivoted to AI for several years and saw its valuation jump to $19 billion in May — will use Core Scientific’s data centers to host its AI chips.
AI companies require a lot of computing power and infrastructure, two things that bitcoin miners typically have access to. AI groups are betting that using miners’ high-performance computing (HPC) data centers will be faster and cheaper than building their own.
Major tech companies including Microsoft, Google and Amazon have said they plan to spend tens of billions of dollars to build out data center infrastructure to support their AI ambitions. Demand for AI capabilities has also fueled investor interest in new cloud startups such as CoreWeave and Lambda Labsthat focus on renting access to GPUs.
“This [normally] “It takes 3-5 years to build an HPC-class data center from scratch,” JPMorgan analysts wrote in a recent note, adding that this timeline has grown even longer due to increased demand for AI projects.
“This competition for energy puts a premium on companies with access to cheap energy today,” they added.
Other large bitcoin miners are using some of their data or processing power for AI.
American hedge fund Coatue Management, founded by “Tiger cub” fund manager Philippe Laffont, recently invested $150 million in Hut 8 to help the bitcoin mining company upgrade its infrastructure to meet the needs of AI companies. The mining company also recently created a new AI division.
Asher Genoot, chief executive of Hut 8, said the company — named after a building in Bletchley Park where mathematician Alan Turing worked during World War II — had focused on the “huge demand and growth in the data center segment, driven largely by AI demand.”
Bitcoin miners hope that shifting their strategy to AI will provide them with higher and more stable revenues.
Several miners, including Core Scientific, filed for bankruptcy in 2022 following the collapse of cryptocurrency exchange FTX and a drop in the price of bitcoin below $16,000.
While cryptocurrency prices have soared since then — bitcoin hit a record high above $73,800 in March and is now trading around $63,800 — the financial rewards they can earn from mining each new bitcoin block have been reduced over the four-year period. bitcoin halving event in April. The high cost of energy and technology also hit its profitability.
Canadian mining company Hive is also focusing on “growing revenue from its Nvidia GPU chip set that powers data services for the AI revolution,” the company said, while New York-based Bit Digital inked a three-year, $275 million deal in January to lease its data center space to a company building large language models.
“We understand that the halving was imminent and we felt that with margins being squeezed overnight by 50 percent, it doesn’t always make sense to rush in on the hope that bitcoin will go up, it’s simply not good business practice,” said Sam Tabar, Bit Digital’s chief executive.
“We are simply renting computing power to people who are building AI models, we are handling the hardware part of that,” he added.
However, the race to build new data centers is overloading the power grids in some parts of the world due to the huge power requirements of HPC. Bitcoin mining is also high energy intensityand both sectors were criticized due to the large amounts of energy they consume.
Google’s Greenhouse Gas Emissions increased by 48 percent over the past five years amid expansion of its data centers for AI processes, while bitcoin mining uses more energy than Pakistan or Ukraine annually, according to data from the University of Cambridge.