Whinstone CEO Chad Harris takes CNBC on a tour of North America's largest bitcoin mine.
Meanwhile, miners need to diversify their business. After Bitcoin's halving in April (an event that occurs roughly once every four years), minting new tokens became much less profitable. “Some miners are feeling the financial hit from the recent block reward halving that halved industry revenues and are actively exploring exit strategies,” JPMorgan Chase analysts wrote in a report earlier this month.
Mergers, fundraising and partnerships are happening at a rapid pace as the burgeoning AI industry needs capabilities and bitcoin miners look for new ways to generate profits from their heavy capital investments.
On Tuesday, U.S. bitcoin miner Core Scientific announced an expanded deal with CoreWeave, an Nvidia-backed startup that's one of the chipmaker's leading providers of technology for running AI models. Core Scientific will provide 70 megawatts of computing infrastructure to support CoreWeave's operations.
Core Scientific said the deal will generate an additional $1.2 billion in revenue over 12 years, on top of existing contracts that are expected to generate $3.5 billion in revenue. The company plans to provide CoreWeave with a total of about 270 megawatts of infrastructure by late 2025, with the potential to add another 230 megawatts at Core Scientific's other sites.
Earlier this month, CoreWeave offered to acquire CoreScientific for $1.02 billion, shortly after the initial agreement was reached. CoreScientific rejected the offer. The company, which relisted on the stock market in January after bankruptcy, is now valued at about $1.8 billion.
“The world is changing, and many of the data centers built over the last 20 years are not suited to support the computing requirements of the future,” Core Scientific CEO Adam Sullivan said in a press release on Tuesday.
The announcement comes a day after bitcoin mining group Hut 8 said it had raised $150 million in financing from private equity firm Coatue to help it build out its AI-enabled data center portfolio.
Miami-based Hut 8 is one of many crypto mining companies pivoting to AI. In its first-quarter earnings report last month, the company announced it had purchased its first batch of 1,000 Nvidia graphics processing units (GPUs) and signed a customer deal with a venture-backed AI cloud platform. CoinShares said 6% of Hut 8's revenue came from AI.
“The market at large is beginning to recognize the scarcity of high quality power generation assets and Hut 8 is building a deep pipeline of highly attractive expansion assets,” Coatue partner Robert Yin said in announcing the fundraising.
Hut 8 CEO Asher Genuto recently told CNBC that the company has “signed new AI commercial deals based on a GPU-as-a-service model, including customer agreements that provide for fixed infrastructure payments and revenue sharing.”
BitDigital, a bitcoin miner that currently derives about 27% of its revenue from AI, said on Monday it had signed a three-year contract with a customer to supply 2,048 Nvidia GPUs, doubling the number of processors the company is offering to an unspecified customer.
To fulfill the contract, BitDigital has ordered 256 servers from Dell Technologies, which will be deployed in a data center in Iceland soon. The company said the contract will generate $92 million in annual revenue. The company plans to pay part of the cost of the GPUs in cryptocurrency.
“We intend to fund the transaction with a combination of cash on our balance sheet and digital assets,” BitDigital said.
Bit Digital also entered into what's known as a sale-leaseback agreement for half of the new GPUs, “which will correspondingly reduce the company's capital expenditures.” In a leaseback, another company owns those GPUs and Bit Digital leases them back, generating revenue by offering the technology to customers.
People line up to buy T-shirts at a pop-up kiosk along Wall Street after online brokerage Robinhood's IPO on July 29, 2021, in New York City.
Spencer Pratt | Getty Images
While most cryptocurrency transactions these days involve miners, there has been at least one notable exception.
Earlier this month, trading platform Robinhood agreed to acquire Luxembourg-based cryptocurrency exchange Bitstamp for approximately $200 million in cash.
Bitstamp holds 50 active licenses and registrations worldwide and is popular in Europe and Asia. The acquisition will allow retail-focused trading app Robinhood to strengthen its crypto operations and compete with Binance and Coinbase.
The deal is expected to close next year, but Robinhood is facing regulatory challenges over its cryptocurrency trading in the U.S. The company said in May that it had received a Wells Notice over its cryptocurrency operations, while the Securities and Exchange Commission is also suing Coinbase and Binance.
Robinhood ended the first quarter with $4.7 billion in cash and cash equivalents. Its shares are up 75% this year.
