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Texas Miners Abandon Crypto for Next New Wave
Cattle graze at the Buffalo Gap Wind Power project in Taylor and Nolan counties, just south of Abilene, Texas.
Robert Daemmrich | Corbis | Getty Images
Lancium Chairman Ali Fenn told CNBC that at full capacity, this will be one of the largest AI data center campuses in the world, in the latest example of the race to fuel AI — and leave it Bitcoin Mining activity is lagging — it is accelerating.
“Data centers are rapidly evolving to support modern AI workloads, requiring new levels of high-density rack space, direct-on-chip liquid cooling, and unprecedented overall power demands,” said Chase Lochmiller, co-founder and CEO of Crusoe.
There are numerous synergies between the bitcoin mining industry and the AI infrastructure industry.
Mining companies have large data centers, with access to fiber optic lines and large amounts of power across the United States. These are exactly the kind of facilities needed for computationally intensive AI operations, which means their sites and technology are in high demand.
In the meantime, miners need to diversify. Following the bitcoin halving in April, an event that happens about once every four years, the business of generating new tokens became much less profitable. Analysts at JPMorgan Chase wrote in a June report that “some operators are feeling the financial squeeze from the recent block reward halving, which cut industry revenues in half, and are actively exploring exit strategies.”
With the burgeoning artificial intelligence sector in need of capacity and bitcoin miners looking for new ways to generate profits on their huge investments, mergers, funding and partnerships are rapidly taking shape.
Lancium and Crusoe join a long list of miners trying to trade bitcoin with artificial intelligence, and so far, the strategy seems to be working.
The combined market capitalization of the 14 largest U.S.-listed bitcoin miners tracked by JPMorgan hit an all-time high of $22.8 billion on June 15, adding $4.4 billion in just two weeks, according to a June 17 research note from the bank.
Bit Digital, a bitcoin miner that now derives about 27% of its revenue from artificial intelligence, She said in June that it had struck a deal with a customer to supply Nvidia GPUs for three years at a data center in Iceland, in a deal that is expected to generate $92 million in annual revenue. It is paying for the GPUs, in part, by liquidating some of its cryptocurrency holdings.
Hut 8based in Miami, said that raised $150 million in debt from private equity firm Coatue to help it develop its AI data center portfolio.
Hut 8 CEO Asher Genoot recently He told CNBC that his company “has finalized commercial agreements for our new AI business under a GPU-as-a-service model, including a customer agreement that includes fixed infrastructure payments and revenue sharing.”
The shift to artificial intelligence has gone particularly well for Scientific corewhich emerged from bankruptcy in January.
On Tuesday, B. Riley raised its rating on the stock from neutral to buy and increased its price target on the stock from $0.50 to $13, citing the company’s recent series of deals with CoreWeave, A Nvidia-backed startup that is a major supplier of chipmaker technology for running artificial intelligence models.
Last month, CoreWeave offered to buy Core Scientific for $1.02 billion, not long after the pair announced an expansion of their existing partnership. Core Scientific rejected the offer. The company is currently valued at about $2 billion.
For years, Crusoe’s work has been virtually synonymous with the bitcoin mining industry.
Crusoe’s technology helps oil companies turn wasted energy, or flare gas, into a useful resource. Many bitcoin miners, with the help of Crusoe, have installed machines adjacent to these sites to capitalize on this cheaper energy source. Starting in 2021For example, ExxonMobil began working with Crusoe to mine bitcoin in North Dakota.
But Crusoe’s Lochmiller told CNBC that AI infrastructure has actually been part of the company’s vision since its founding six years ago.
“We are rethinking AI infrastructure from the ground up: from our energy solutions, to the design, engineering and construction of our purpose-built AI data centers, to our manufacturing capabilities with Crusoe Industries for leading electric data center infrastructure, and finally, to our purpose-built AI compute stack,” he said.
The Abilene plant, scheduled to begin operations in 2025, also plans to use primarily renewable energy sources.
“Our power orchestration technology is designed to ensure that large-scale AI data center campuses can be an asset to the network, not a liability,” Lancium’s Fenn told CNBC.
Lancium has patented a technology that allows it to transform energy buyers’ demand into a sort of dial that can be gradually raised or lowered in as little as five seconds. This helps balance a power grid that has inherently volatile energy sources like wind and solar.
“The original vision of Lancium “was to bring large-scale loads to places with the best and most abundant renewable energy to facilitate the energy transition,” Fenn said.
In 2018, Fenn says the only activity that was suitable for this purpose was bitcoin mining.
One of the most important features of Bitcoin is that it is completely location agnostic. Miners only need a power source and an internet connection, unlike other industries that need to be relatively close to their end users.
In some cases, the proceeds from cryptocurrency creation have provided enough financial incentive to justify building the infrastructure needed to harness previously untapped energy sources, especially in Texas, which is known as a Mecca for renewable energy sources like wind and solar.
Bitcoin miners are also flexible consumers of electricity: in essence, they function as buyers who are willing to accept all the energy they have available, at any time of day, and are equally willing to shut down at a mere few seconds’ notice.
But Lancium’s strategy has since shifted towards artificial intelligence.
“Traditional data centers were, and still are, primarily optimized for proximity to urban areas and users,” Fenn said. “That’s all changed now, with AI data centers optimized for large-scale energy availability, cost, and green. Our vision, campuses, and technology are perfectly positioned for this significantly larger and expanded opportunity.”
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Needham analysts estimate that large publicly traded bitcoin miners will more than double their power capacity over the next one to two years, including their plans to expand mining and HPC operations.
THE Estimates from the Electric Power Research Institute that data centers could absorb up to 9% of the country’s total electricity consumption by 2030, up from about 4% in 2023. Many see nuclear power as the answer to meeting that demand.
TeraWulf powers its mining operations with nuclear energy and is looking to get into machine learning. So far, the company has two megawatts dedicated to HPC capacity, though it plans to transition its energy infrastructure toward AI and HPC.
OpenAI CEO Sam Altman told CNBC last year who is a big proponent of going nuclear when it comes to meeting the demands of AI workloads.
“I don’t see a way to get there without nuclear,” Altman said. “I mean, maybe we could get there with just solar and storage. But from my perspective, I think this is the most likely and best way to get there.”