Bitcoin Mining Companies Diversify to AI Operations for Hefty Revenues

Key takeaway: 

• Bitcoin miner Core Scientific expands its partnership with AI solutions provider CoreWeave.
• Mining companies are increasingly leveraging AI to maximize revenue potential.
• Demand for Bitcoin mining infrastructure and technology surges as they prove ideal for intensive AI computing.

Bitcoin Mining Firms Pivot to AI in Search of Higher Returns

Earlier this week, US Bitcoin mining firm Core Scientific announced an expanded 12-year deal with CoreWeave, a Nvidia-backed startup that supplies technology for running AI models.

Under this agreement, Core Scientific will modify 100 MW of its infrastructure to deliver approximately 70 MW to host CoreWeave’s NVIDIA GPUs for high-performance computing (HPC) operations.

Today, we announced a new contract with @CoreWeave for the delivery of ~70 MW of additional infrastructure to host #HPC operations.

Read the full press release here: https://t.co/FqHqy6g7Yz pic.twitter.com/SOhCxqNKyM

— Core Scientific (@Core_Scientific) June 25, 2024

The AI industry's insatiable need for high-energy computing and Bitcoin miners' search for new revenue streams post-halving creates an opportunity for collaboration.

This is because Bitcoin mining companies have expansive data centers with access to fiber lines and large amounts of power across the U.S., making them ideal for compute-intensive AI operations.

Notably, fellow Bitcoin mining firms are also embracing this trend. 

Hut 8 raised $150 million in debt from private equity firm “Coatue” to expand its data center portfolio for AI, while Bit Digital inked an agreement to supply 2,048 Nvidia GPUs over three years, doubling its processors for an unspecified client. 

We are incredibly excited to announce a $150 million strategic investment from @coatuemgmt to partner in building a next generation AI infrastructure platform. This investment will accelerate growth in our data center portfolio and provides access to Coatue's extensive network of… pic.twitter.com/BYvpHx50PS

— Hut 8 (@Hut8Corp) June 24, 2024

Core Scientific expects to earn $275 million from the contract, or $92 million annually. Following the deal, the company is expected to generate 27% of its revenue from AI.

Core Scientific and CoreWeave Financial Outlook AI

Core Scientific's latest partnership with CoreWeave is expected to provide impressive financial outlooks for both firms.

The new contract is projected to add an additional $1.225 billion in cumulative revenue over 12 years, on top of the over $3.5 billion from previously announced contracts.

Recall that the Bitcoin mining firm and AI tool provider had previously entered a contract on June 3, 2024. CoreWeave exercised its first option of contracting for additional infrastructure, leading to this expanded agreement.

The driving force behind this hard pivot for Bitcoin mining firms like Core Scientific is the recent halving event. The fourth Bitcoin halving reduced the mining reward from 6.25 BTC to 3.125 BTC per block, decreasing the profitability of generating new tokens.

A recent CoinShares report highlights that the Bitcoin mining industry faces substantial cost increases due to the halving event, with electricity and overall production costs almost doubling. 

To counter these costs, miners are optimizing energy use, increasing efficiency, and buying better-priced hardware. Despite these avenues, the industry is seeking new opportunities for growth and profitability.

This is where partnerships between the Bitcoin and AI industries come into play. 

Driven by the pursuit of increased financial growth, expansion, and innovation, these collaborations are gaining momentum. The projected AI market size, expected to surpass $800 billion by 2030, underscores the importance of this trend.