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AI-hungry tech giants can’t build fast enough. They will need help from Bitcoin miners – DL News
- Bitcoin miners are starting to build their own AI fleets.
- They may soon start leasing their services to tech giants like Google.
- The strategy opens up a new revenue stream for miners that does not depend on the price of Bitcoin.
Artificial intelligence – and the business behind it – is presenting new opportunities for Bitcoin miners.
While miners have traditionally relied on Bitcoin rewards as their first and main source of income, some companies have recently allocated resources to building their own AI fleets.
By entrusting their computing power to technology companies that are developing artificial intelligence tools, these miners can earn considerable and, above all, predictable returns. The strategy therefore opens up a new revenue stream for miners, which is not dependent on the volatility of Bitcoin’s price.
“Miners will have a huge opportunity moving forward with AI computing,” said Brian Dixon, CEO of crypto hedge fund Off The Chain Capital DL News.
“Most of these miners can redirect a significant amount of their computers to basically serve Google, Microsoft, Amazon, all these big companies,” Dixon said. “We will see some of these big tech companies form major partnerships with Bitcoin miners.”
Hybrid approach: Hive and Hut 8
At least two large mining companies have started this process: Hut 8 and Hive Digital Technologies.
Hive CEO Aydin Kilic said this DL News that the company’s AI fleet is already operational. Of the company’s 38,000 graphics processing units, or GPUs (computers capable of performing high-speed calculations), just over 10% have been repurposed for AI-based computing tasks.
And Hive is actively looking for more opportunities. “Our ambitious goal is to expand our AI business to reach annual revenue in excess of $100 million by 2025,” Kilic said. Hive he had $121 million of total revenue in 2023.
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Kilic highlighted the resilience that AI-based computing would bring to the company’s balance sheet, especially in an industry as cutthroat as Bitcoin mining.
Meanwhile, Hut 8 strategic manager Mike Ho said this DL News that AI-based computing also has potentially higher returns than Bitcoin mining.
While Hut 8’s fleet is not yet operational, the company plans to diversify “imminently,” Ho said, pointing to the company’s $40 million GPU purchase in October 2023.
Hut 8 also said it will not repurpose any of its existing Bitcoin towards artificial intelligence, preferring instead to “implement next-generation technology” for that purpose.
Competing industries
The mining industry has long clashed with the artificial intelligence industry.
The reason: Both AI miners and manufacturers need huge numbers of high-performance computing chips. Miners need high computational power to maintain the Bitcoin blockchain, while AI models are trained on colossal amounts of data.
“Bitcoin ASIC chips have had to compete with strong demand for AI chips this cycle, and so manufacturers have been keen on bulk purchase contracts/options with miners who are flush with cash,” the company’s analysts wrote of Bernstein research in a recent report. ASIC refers to application-specific integrated circuits, which are chips that can be customized for a specific use.
Not only are AI miners and data centers competing for chips, but they are also trying to acquire similar sites, sites with low electricity prices in friendly jurisdictions that preferably use renewable energy, such as Texas.
Miners have also expressed concern that AI-powered data centers may be willing to pay higher energy costs than miners. This has led major mining companies to secure long-term energy contracts, Bernstein said.
Acquisitions
Ultimately, according to Dixon, Bitcoin miners’ foray into artificial intelligence could lead big tech companies like Google and Amazon to bid to acquire miners’ AI clusters.
“If you’re one of these big tech companies, you basically have two options: find someone like a Bitcoin miner who you can hire to do the AI computation, or buy data centers,” Dixon said. “You can’t build them fast enough.”
“It’s possible we’ll see some of them start buying mining companies outright,” Dixon added. “Amazon, Google, these big giants in the tech space need this AI-based computing. There’s really no way around it.”
When asked whether they would be open to a potential acquisition, Hut 8 and Hive both said no.
Tom Carreras is a market correspondent for DL News. Do you have a tip about Bitcoin mining and artificial intelligence? Contact tcarreras@dlnews.com