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Cryptocurrencies Capture Mergers and Acquisitions Frenzy as Bitcoin Miners Chase AI Boom
Whinstone CEO Chad Harris takes CNBC on a tour of the largest bitcoin mine in North America.
In the meantime, miners need to diversify. Following the bitcoin halving in April, an event that happens approximately once every four years, the business of generating new tokens became much less profitable. Analysts at JPMorgan Chase wrote in a report earlier this month that “some operators are feeling the financial pinch resulting from the recent block reward halving, which halved industry revenues, and are actively exploring exit strategies.” .
With the burgeoning AI sector in need of capacity and bitcoin miners looking for new ways to generate returns on their large capital investments, mergers, funding and partnerships are rapidly coming together.
US bitcoin miner Tuesday Scientific core announced an expanded agreement with CoreWeaveA Nvidiabacked startup that is a major supplier of the chipmaker’s technology for running artificial intelligence models. Core Scientific will provide 70 megawatts of computing infrastructure to support CoreWeave operations.
Scientific core said the agreement will generate an additional $1.2 billion in revenue over 12 years, on top of an existing deal that is expected to bring in $3.5 billion. In total, the company expects to deliver approximately 270 megawatts of infrastructure to CoreWeave by the second half of 2025, with the potential to add an additional 230 megawatts at other Core Scientific sites.
Earlier this month, CoreWeave offered to buy Core Scientific for $1.02 billion, not long after their initial deal. Core Scientific rejected the offer. The company, which returned to the public market in January after filing for bankruptcy, it is currently worth about $1.8 billion.
“The world is changing, and many data centers built over the past 20 years are ill-suited to support future computing requirements,” said Adam Sullivan, CEO of Core Scientific, in Tuesday’s press release.
The day before that announcement, mining group Bitcoin Hut 8 said so raised $150 million in debt from private equity firm Coatue to help it build its AI data center portfolio.
Hut 8based in Miami, is one of many cryptocurrency mining companies that are moving towards artificial intelligence. The company said in its first quarter earnings report last month it bought its first batch of 1,000 Nvidia graphics processing units (GPUs) and secured a customer deal with a venture-backed AI cloud platform. According to CoinShares, Hut 8 generates 6% of sales from artificial intelligence.
“The broader market is beginning to appreciate the scarcity of high-quality energy resources, and Hut 8 has built a deep pipeline of highly attractive expansion resources,” Robert Yin, a partner at Coatue, said in the financing announcement.
Asher Genoot, CEO of Hut 8 recently he told CNBC that his company “has finalized commercial agreements for our new AI vertical under a GPU-as-a-service model, including a customer agreement that provides fixed infrastructure payments plus revenue sharing.”
Bit Digital, a bitcoin miner that now derives about 27% of its revenue from artificial intelligence, She said on Monday struck a deal with a customer to supply 2,048 Nvidia GPUs over three years, doubling the number of processors supplied to the unspecified customer.
To fulfill the contract, Bit Digital ordered 256 servers Dell Technologiesand will soon deploy them in a data center in Iceland. The company said the contract is expected to generate $92 million in annual revenue. It’s paying for the GPUs, in part, by offloading some cryptocurrencies.
“The Company intends to finance the deal with a mix of cash and digital assets on its balance sheet,” Bit Digital said.
Bit Digital has also entered into a so-called sale-leaseback agreement for half of the new GPUs, “which will proportionately reduce the company’s capital outlay.” With leaseback, another company owns those GPUs and Bit Digital leases them back, generating revenue by providing the technology to customers.
People wait in line for T-shirts at a pop-up kiosk for online brokerage Robinhood along Wall Street after the company went public with an IPO early in the day July 29, 2021 in New York City.
Spencer Platt | Getty Images
While most recent cryptocurrency deals involve miners, there has been at least one major notable exception.
Earlier this month, trading platform Robin Hood agreed to agreement to buy Bitstampa Luxembourg-based cryptocurrency exchange, for approximately $200 million in cash.
Bitstamp holds 50 active licenses and registrations worldwide and is popular in Europe and Asia. Purchasing helps Robin Hooda retail-focused trading app, strengthens its crypto operations to better take on Binance and Coinbase.
The deal, which closes next year, comes as Robinhood faces regulatory challenges in the United States over its dealings with cryptocurrencies. In May the company Wells said he received a notification for its cryptographic operations. The Securities and Exchange Commission also sued Coinbase and Binance.
Robinhood had $4.7 billion in cash and cash equivalents at the end of the first quarter. Its shares are up 75% this year.