Core Scientific’s 104 MW Bitcoin Mining Data Center in Marble, North Carolina
Carey McKelvey
AUSTIN – For five years, Bitcoin miner core science There has been a quiet shift from mining to the artificial intelligence market, which requires massive amounts of power to handle the training of artificial intelligence models and the massive workloads that come with it.
The 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 agreement expands an existing partnership between the two companies and will add more than $3.5 billion in revenue over the life of the contract.
CoreWeave, support Nvidia, rents out the graphics processing units (GPUs) needed to train and run artificial intelligence models. CoreWeave was valued at $19 billion in a funding round last month. Core SciWntific will provide approximately 200 MW of infrastructure for CoreWeave’s operations.
Core Scientific emerged from bankruptcy in January and has been mining various digital assets since 2017.
“The best way to think about Bitcoin mining facilities is that we are essentially the power shell of the data center industry,” Core Scientific CEO Adam Sullivan told CNBC.
Sullivan became CEO while the company was still in the throes of bankruptcy caused by Bitcoin’s 2022 crash. Non-Bitcoin business operations are back on the public market.
Although Core is up more than 40% since re-listing earlier this year, its market capitalization of about $865 million is significantly lower than its July 2021 valuation of $4.3 billion.
After OpenAI launched ChatGPT in November 2022, demand for artificial intelligence computing and infrastructure surged, triggering an investment boom in artificial intelligence models and new startups. Meanwhile, Core Scientific and other miners such as Bit Digital, Hive, Hut 8 and TeraWulf have been looking to increase revenue streams after the so-called Bitcoin halving in April slashed rewards paid to Bitcoin miners by 50%.
Many companies have been retrofitting their large facilities to meet the demands of the market.
James Butterfill, director of research at digital asset firm CoinShares, said: “Bitcoin miners are often stationed in energy-secure and energy-intensive data centers, and they find that these facilities are also very suitable for artificial intelligence operations.”
Butterfill said this overlap has led to competition for rack space between Bitcoin mining and artificial intelligence activities. According to a CoinShares report, although artificial intelligence operations require 20 times the capital expenditures of Bitcoin mining, they are more profitable.
“The introduction of artificial intelligence activities will lead to increased depreciation and amortization, thereby improving gross profit margins,” Butterfield said.
According to CoinShares, 27% of Bit Digital’s revenue comes from artificial intelligence. Hut 8 gets 6% of its sales from artificial intelligence, while Hive, which has data centers in Canada and Sweden, gets 4% of its revenue from these services.
Cabin 8 said in a statement First quarter financial report The company has purchased its first 1,000 Nvidia GPUs and signed a customer agreement with a venture-backed artificial intelligence cloud platform as part of its expansion into new technologies that offer higher returns.
“We have finalized commercial agreements for new artificial intelligence verticals under a GPU-as-a-service model, including customer agreements that provide fixed infrastructure payments and revenue sharing,” Hut 8 CEO Asher Genoot said.
Genoot added that the company expects to start generating annual revenue of approximately $20 million in the second half of this year.
bit number As of the end of April, 251 servers were actively generating revenue from its first AI contract, and the company said it generated approximately $4.1 million in revenue from the operation that month.
Iris Energy expects annual revenue from its artificial intelligence cloud services to reach $14 million to $17 million. Core Scientific’s expanded collaboration with CoreWeave is expected to generate $290 million in annual revenue.
“While we intend to continue to be one of the largest and most productive Bitcoin miners, we want to have a diversified business model and more predictable cash flow,” Sullivan said.
Bitcoin’s volatility makes mining a challenging business.
Although Bitcoin has risen more than 150% in the past year to around $69,000, the bear market in 2022 has caused many miners to go bankrupt or be forced to shut down completely.
The complex process of moving to artificial intelligence
Moving to artificial intelligence is not as simple as repurposing existing infrastructure and machines, because the requirements of high-performance computing (HPC) data centers are different, and so are the needs of data networks.
Needham analysts wrote in a May 30 report: “With the exception of transformers, substations and some switchgear, almost all the infrastructure miners have today will need to be bulldozed and built from the ground up to accommodate HPC. “
The equipment used to mine Bitcoin is called an Application Specific Integrated Circuit (ASIC). They are built specifically for cryptocurrency mining and cannot be used to perform other operations.
Needham estimates HPC data center capex at $8 million to $10 million per megawatt (excluding GPUs), while Bitcoin mining site capex typically ranges from $300,000 to $800,000 per megawatt (excluding ASICs) .
Core’s Sullivan said there are many synergies between the two companies.
“One of the most exciting parts of the Bitcoin mining business is that we have access to large amounts of power across the United States through fiber optic lines,” he said.
In addition to its partnership with CoreWeave, Core Scientific also announced that it is working to convert 500 megawatts of Bitcoin mining infrastructure across the country into HPC data centers over the next three to four years.
Sullivan said the transformation is manageable because the company owns and controls all of its data center infrastructure.
“We have to buy some components to retrofit HPC, but we can get them easily,” he said.
Needham analysts estimate that the large publicly traded Bitcoin miner is expected to more than double its power capacity over the next one to two years, including expansion plans for its mining and HPC operations.
Clean energy is a popular choice because it is the cheapest energy source in many markets. Large-scale miners compete in a low-margin industry where the only variable cost is often energy, so they are incentivized to switch to the cheapest sources of electricity in the world. one Industry report It is estimated that 54.5% of the Bitcoin network is powered by sustainable electricity.
this Calculation from Electric Power Research Institute By 2030, data center electricity consumption may account for 9% of the country’s total electricity consumption, compared with about 4% in 2023.
Terawulf uses nuclear energy to power its mining farms and is looking to get into machine learning. So far, the company has 2 MW of capacity dedicated to HPC, but it plans to shift its energy infrastructure toward artificial intelligence and HPC.
OpenAI CEO Sam Altman told CNBC last year that he is a strong believer in nuclear energy when it comes to meeting the needs of artificial intelligence workloads.
“I don’t think we can achieve this without nuclear weapons,” Altman said. “I mean, maybe we just need solar and storage to get there. But from my perspective, I feel like that’s the most likely and best way to get there.”
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