Core Scientific’s 104 Megawatt Bitcoin Mining Data Center in Marble, North Carolina

Kerry McKelvey.

Austin – For five years, Bitcoin Miner Basic scientific is quietly diversifying into mining and artificial intelligence, a market that will require immense power to train AI models and handle the massive workloads that follow.

This move is no longer a secret.

On Monday, Core Scientific announced a 12-year agreement with cloud provider CoreWeave to provide infrastructure for use cases such as machine learning. Core Scientific said the deal, which expands on the existing partnership between the two companies, will add more than $3.5 billion in revenue over the course of the agreement.

Powered by CoreWeave, Nvidia, rents graphics processing units (GPUs), which are needed to train and run AI models. CoreWeave was valued at $19 billion in a funding round last month. Core Scientific will provide approximately 200 MW of infrastructure for CoreWeave’s operations.

Core Scientific, which emerged from bankruptcy in January, has been mining digital assets since 2017. The company started diversifying into other services in 2019.

“The best way to think about bitcoin mining facilities is that we’re essentially PowerShell for the data center industry,” Core Scientific CEO Adam Sullivan told CNBC.

Sullivan jumped into the role of CEO while the company was still in the throes of bankruptcy, which resulted in the collapse of Bitcoin in 2022. Since then, the former investment banker has settled debts with disgruntled creditors and expanded the company’s non-bitcoin footprint. As a business it re-entered the public market.

Although Kor has risen more than 40% since relisting earlier this year, its market capitalization is around $865 million, down significantly from its July 2021 valuation of $4.3 billion.

Demand for AI compute and infrastructure increased after OpenAI unveiled ChatGPT in November 2022, triggering a rush of investment in AI models and startups. Meanwhile, Core Scientific and other miners such as BitDigital, Hive, Hut 8, and TeraWulf are looking to bolster their revenue streams after the so-called Bitcoin halving in April paid out Bitcoin miners. Outgoing rewards have been reduced by 50%.

Many are retrofitting their larger facilities to meet market needs.

“Bitcoin miners, often deployed in energy-efficient and energy-intensive data centers, also find these facilities ideal for AI operations,” said James Butterful, head of research at digital asset firm CoinShares.

Butterfill said the overlap is leading to competition for rack space between Bitcoin mining and AI activities. According to a report by CoinShares, AI operations require 20 times the capital costs of Bitcoin mining, but are more profitable.

“The introduction of AI activities leads to increased depreciation and amortization, which can increase gross profit margins,” Butterful said.

According to CoinShares, Bit Digital derives 27% of its revenue from AI. Hut 8 generates 6% of sales from AI, and Hive, which has data centers in Canada and Sweden, derives 4% of its revenue from these services.

Read more about tech and crypto from CNBC Pro

Hit 8 said in it First quarter earnings report that it has purchased its first batch of 1,000 Nvidia GPUs and secured a customer contract with a venture-backed AI cloud platform as part of its expansion into new technologies offering higher returns.

“We have finalized commercial agreements for our new AI vertical under a GPU-as-a-Service model, including a customer agreement that is fixed Provides for infrastructure payments and revenue sharing.”

Gennot added that the company expects to start generating revenue at an annualized rate of about $20 million in the second half of the year.

Bit digital As of the end of April, 251 servers from its first AI contract were actively generating revenue, and the company said it generated about $4.1 million in revenue from operations that month.

Iris Energy expects to generate between $14 million and $17 million in annual revenue from its AI cloud services. Core Scientific’s expanded arrangement with CoreWeave is expected to generate annual revenue of $290 million.

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“While we intend to remain one of the largest and most productive bitcoin miners, we anticipate a diversified business model and more predictable cash flow,” Sullivan said.

The volatility of Bitcoin has made mining a challenging business.

While Bitcoin is currently up more than 150% in the past year to near $69,000, the 2022 bear market has sent many miners into bankruptcy or forced them to shut down altogether.

A complex move in AI

Pivoting to AI is not as simple as repurposing existing infrastructure and machines, because the needs of a high-performance computing (HPC) data center are different, as are the needs of a data network.

“Except for transformers, substations, and some switchgear, almost all infrastructure miners currently need to build and build from the ground up to accommodate HPC,” analysts at Needham wrote in a May 30 note. Wrote in the report.

The rigs used to mine Bitcoin are called Application-Specific Integrated Circuits (ASICs). They are specifically designed for crypto mining and cannot be used for anything else.

Needham estimates that HPC data centers run at $8 million to $10 million per megawatt in capex, excluding GPUs, while bitcoin mining sites typically run at $300,000 to $800,000 per megawatt in capex, including ASICs are not included.

Cover’s Sullivan says there is a lot of synergy between the two businesses.

“One of the most exciting parts about the bitcoin mining business is that we have access to large amounts of electricity with access to fiber lines across the United States,” he said.

Beyond its partnership with CoreWeave, Core Scientific has also announced that over the next three to four years, it will work to convert 500 megawatts of its bitcoin mining infrastructure to HPC data centers across the country. Is.

Sullivan said the retrofit is manageable because the company owns and controls all of its data center infrastructure.

“There are components that we have to buy for HPC to recover, but those are things that we can easily get,” he said.

All eyes are on AI at SXSW.

In the next one to two years, Needham analysts estimate that large publicly traded Bitcoin miners are expected to include both their mining and HPC business expansion plans.

Clean energy is a popular choice because it is the cheapest source of electricity in many markets. Large-scale miners compete in a low-margin industry, where their only variable cost is usually energy, so they have an incentive to migrate to the world’s cheapest power sources. one Industry report It is estimated that the Bitcoin network is powered by 54.5% sustainable electricity.

gave Electric Power Research Institute estimates That data centers could take 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 meet this demand.

TeraWulf powers its mining sites with nuclear energy, and is looking to get into machine learning. So far, the firm has two megawatts dedicated to HPC capacity, though it has plans to shift its energy infrastructure towards AI and HPC.

OpenAI CEO Sam Altman told CNBC last year that he has a lot of faith in Johari when it comes to meeting the needs of AI workloads.

“I don’t see a way to get there without nuclear,” Altman said. “I mean, maybe we can get there with just solar and storage. But from my perspective, I feel like that’s the most likely and the best way to get there.”

Watch: Nvidia closed at another record high.

Nvidia closed at another record high.

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