- Bitcoin miner Core Scientific ventures into artificial intelligence, signing a 12-year deal with CoreWeave, anticipating over $3.5 billion in revenue.
- This move reflects a broader trend among miners, including Bit Digital, Hive, Hut 8, and TeraWulf, seeking new revenue streams post-bitcoin halving.
- AI compute and infrastructure demand surged after OpenAI’s ChatGPT release, driving investments in AI models and startups.
- Transitioning to AI presents challenges, including substantial capital expenditure and infrastructure overhaul.
- Core Scientific aims to convert 500 megawatts of mining infrastructure into HPC data centers over the next few years.
Main AI News:
In the realm of cryptocurrency, bitcoin miner Core Scientific has been discreetly broadening its horizons beyond mining operations and delving into the lucrative domain of artificial intelligence. This strategic shift recognizes the burgeoning demand for immense computational power required for AI model training and the subsequent heavy workloads.
The covert maneuvers of Core Scientific have now come to light. Recently, the company disclosed a monumental 12-year collaboration with cloud provider CoreWeave, aimed at furnishing infrastructure tailored for applications like machine learning. This ambitious endeavor, an extension of an existing partnership, is anticipated to inject over $3.5 billion in revenue throughout the contract’s duration.
CoreWeave, backed by tech giant Nvidia, specializes in renting out graphics processing units (GPUs), indispensable for both AI model training and execution. The company’s valuation soared to $19 billion following a significant funding round last month. Core Scientific is slated to provide approximately 200 megawatts of infrastructure to augment CoreWeave’s operational capacity.
Having emerged from bankruptcy earlier this year, Core Scientific has been actively involved in mining various digital assets since 2017. However, its foray into diversified services commenced in 2019, marking a pivotal transition.
Adam Sullivan, CEO of Core Scientific, likened bitcoin mining facilities to potent power hubs within the data center industry. He emphasized the company’s pivotal role in facilitating AI endeavors amid its restructuring phase.
Sullivan’s appointment as CEO amidst the company’s financial turmoil following the 2022 bitcoin crash underscores his adept management in resolving creditor disputes and fortifying the company’s non-bitcoin ventures.
Despite a commendable 40% surge in Core’s valuation post-relaunch earlier this year, its current market capitalization stands at approximately $865 million, a notable descent from its peak valuation of $4.3 billion in July 2021.
The surge in demand for AI compute and infrastructure, catalyzed by OpenAI’s revelation of ChatGPT in November 2022, has ignited a frenzy of investments in AI models and startups. Concomitantly, Core Scientific and other mining entities such as Bit Digital, Hive, Hut 8, and TeraWulf have pivoted towards diversifying revenue streams post the bitcoin halving event in April, which halved rewards for bitcoin miners.
These mining companies are retrofitting their sprawling facilities to align with the exigencies of the burgeoning AI market, leveraging their energy-intensive data centers ideal for AI operations.
James Butterfill, Head of Research at digital asset firm CoinShares, elucidated the escalating competition for rack space between bitcoin mining and AI operations. While AI initiatives entail substantially higher capital expenditures compared to bitcoin mining, they offer superior profitability, as outlined in a report by CoinShares.
Bit Digital garners 27% of its revenue from AI endeavors, while Hut 8 and Hive derive 6% and 4% of their revenue from similar services, respectively.
Hut 8’s CEO, Asher Genoot, outlined the company’s strategic thrust into AI technologies, exemplified by the procurement of 1,000 Nvidia GPUs and forging alliances with AI cloud platforms to bolster revenue streams.
Meanwhile, Bit Digital reported revenue of approximately $4.1 million from its first AI contract, underpinning the burgeoning prospects in this domain.
Iris Energy anticipates annual revenue ranging from $14 million to $17 million from its AI cloud services, while Core Scientific’s expanded collaboration with CoreWeave is poised to yield annual revenue totaling $290 million.
Sullivan reiterated the company’s commitment to retaining its stature as a prominent bitcoin miner while embracing a diversified business model to ensure more predictable cash flows.
The inherent volatility of bitcoin underscores the challenges inherent in mining operations. While bitcoin’s current upward trajectory of over 150% in the past year appears promising, the tumultuous bear market of 2022 precipitated a wave of bankruptcies and closures among miners.
Transitioning to AI, however, entails a complex overhaul of infrastructure and machinery, given the disparate requirements of high-performance computing (HPC) data centers vis-a-vis bitcoin mining facilities.
According to analysts at Needham, the transformation necessitates substantial capital expenditure, with HPC data centers commanding costs ranging from $8 million to $10 million per megawatt, excluding GPUs. In contrast, bitcoin mining sites operate at a fraction of these costs, typically ranging from $300,000 to $800,000 per megawatt, exclusive of ASICs.
Adam Sullivan underscores the synergies between bitcoin mining and AI ventures, citing the abundant power resources and fiber optic connectivity accessible across the United States.
Beyond its collaboration with CoreWeave, Core Scientific is poised to convert 500 megawatts of its bitcoin mining infrastructure into HPC data centers over the next three to four years. Sullivan reassured investors of the feasibility of this transition, emphasizing the company’s ownership and control over its data center assets.
Looking ahead, Needham analysts anticipate a significant expansion in power capacity among publicly traded bitcoin miners over the next one to two years, encompassing both mining and HPC endeavors.
Clean energy emerges as a preferred choice, given its cost-effectiveness in numerous markets. Miners, operating within a low-margin industry, are incentivized to migrate towards the most economically viable energy sources. Notably, an estimated 54.5% of the bitcoin network is powered by sustainable electricity.
The surge in data center energy consumption underscores the imperative of sustainable energy solutions. Tapping into nuclear energy emerges as a promising avenue to meet burgeoning demand, as underscored by TeraWulf’s pioneering initiatives in this realm.
Sam Altman, CEO of OpenAI, advocates for nuclear energy as a quintessential enabler for meeting the burgeoning demands of AI workloads, highlighting its indispensable role in this paradigm shift.
Conclusion:
The integration of bitcoin mining with AI ventures signals a strategic shift towards diversification within the cryptocurrency sector. By capitalizing on the burgeoning AI market, miners aim to mitigate the inherent volatility of bitcoin while tapping into new revenue streams. This convergence underscores the industry’s resilience and adaptability, paving the way for sustained growth and innovation in the coming years.
