Whinstone CEO Chad Harris leads CNBC on a tour of North America’s largest Bitcoin mining site.
Cryptocurrency companies have suddenly become the center of attention. The catalyst is artificial intelligence. Bitcoin mining companies have massive data centers that can access fiber optic lines and large amounts of electricity across the United States. They are the type of facilities needed for compute-intensive artificial intelligence operations, which means they have a large website and technology demand. At the same time, miners need to diversify. Following the Bitcoin halving in April (which occurs roughly every four years), the business profits from generating new tokens have declined significantly. Analysts at JPMorgan Chase wrote in a report earlier this month, “Some operators are feeling financial pressure from the recent halving of block rewards, which has cut industry revenue in half, and they are actively exploring exit strategies.” As the emerging artificial intelligence industry requires capacity, Bitcoin miners are looking for new ways to generate returns from their massive capital investments, and mergers, financing, and partnerships are rapidly converging. On Tuesday, U.S. Bitcoin miner Core Scientific announced an expansion agreement with CoreWeave. CoreWeave, a startup supported by Nvidia, is a major provider of technology for running artificial intelligence models for the chip manufacturer. Core Scientific will provide 70 megawatts of computational infrastructure to support CoreWeave’s operations. The deal is expected to generate an additional $1.2 billion in revenue over 12 years, while the existing arrangement is expected to bring in $3.5 billion in revenue. Overall, the company plans to provide approximately 270 megawatts of infrastructure for CoreWeave by the second half of 2025, and potentially add an additional 230 megawatts of infrastructure at other Core Scientific sites. Earlier this month, CoreWeave proposed a $1.02 billion acquisition of Core Scientific, shortly after they reached a preliminary agreement. Core Scientific rejected the bid. The company returned to the public market in January after bankruptcy, and is currently valued at approximately $1.8 billion. Core Scientific CEO Adam Sullivan said in a press release on Tuesday, “The world is changing, and many data centers built over the past 20 years are not suitable to support the computing demands of the future.”
Hut 8, a Bitcoin mining group, announced a 15% surge after announcing a $150 million investment in artificial intelligence: CNBC Crypto WorldCrypto World
The day before announcing this news, Bitcoin mining group Hut 8 announced that it had raised $150 million in debt from private equity firm Coatue to help build its artificial intelligence data center portfolio. Based in Miami, Hut 8 is one of many cryptocurrency mining companies shifting towards artificial intelligence. The company announced in last month’s first quarter earnings report that it had purchased its first batch of 1,000 Nvidia graphics processing units and had entered into a customer agreement with a venture capital-backed artificial intelligence cloud platform. Data from CoinShares shows that 6% of Hut 8’s sales come from artificial intelligence. Coatue partner Robert Yin said in the financing announcement, “A broader market is beginning to realize the scarcity of high-quality power assets, and Hut 8 has built a deep pipeline of attractive expansion assets.” Hut 8 CEO Asher Genoot recently told CNBC that his company “has locked in business agreements for our new artificial intelligence vertical according to the GPU as a service model, including a customer agreement that provides fixed infrastructure payments and revenue sharing.”
Bitcoin mining company Bit Digital is dumping tokens to buy GPUs
Bitcoin mining company Bit Digital currently estimates that 27% of its revenue comes from artificial intelligence. The company announced on Monday that it had reached an agreement with a client to supply 2,048 Nvidia GPUs over three years, doubling the number of processors it provides to an unspecified client. To fulfill the contract, Bit Digital ordered 256 servers from Dell Technologies and will soon deploy them in a data center in Iceland. The company said the deal is expected to generate $92 million in annual revenue. To some extent, it is paying for the GPUs by dumping some cryptocurrencies. Bit Digital said, “The company intends to mix cash and digital assets on the balance sheet to fund this transaction.” Bit Digital has also signed so-called sale-leaseback agreements for half of the new GPUs, “which will correspondingly reduce the company’s capital expenditures.” Through the leaseback, another company owns the GPUs, which Bit Digital rents back to generate revenue by providing technology to clients.
Although most recent cryptocurrency trades have involved miners, there is at least one notable exception. Earlier this month, trading platform Robinhood agreed to acquire Luxembourg-based cryptocurrency exchange Bitstamp for about $200 million in cash. Bitstamp has 50 active licenses and registrations worldwide and is popular in Europe and Asia. The acquisition helps retail-focused trading app Robinhood strengthen its cryptocurrency business to better compete with Binance and Coinbase. The deal is expected to close next year, while Robinhood faces regulatory challenges for cryptocurrency trading in the United States. In May, the company said it received a notice from the Office of the Comptroller of the Currency about its cryptocurrency business. The U.S. Securities and Exchange Commission also sued Coinbase and Binance. As of the end of the first quarter, Robinhood had $4.7 billion in cash and equivalents. Its stock has risen 75% this year.
Don’t miss these insights from CNBC PRO. BTIG’s S&P 500 Index indicates that these Nasdaq stocks are expected to fall as the second half of the year begins. Fundstrat’s Tom Lee continues to make bold bullish stock calls and has set a chart record for Nvidia, which may mark the stock’s high point as it watches for concerning chart patterns for Nvidia and other tech companies to signal an impending sell-off.