AI Is Here, But That Doesn't Mean the End of Bitcoin Miners: Blockspace

Anyone who follows the public Bitcoin mining market knows that artificial intelligence (AI) and the business shift to high-performance computing (HPC) has become the latest trend among Bitcoin miners. What started as a slow trend last year has suddenly turned into a business strategy being explored by many leading public Bitcoin miners.

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Core Scientific, Bit Digital, Hut 8, Hive, and IREN are all currently developing profitable AI/HPC ventures, while Crusoe Energy, Lancium, Cipher, Terawulf, Riot, and Bitfarms are in the development or research phase. With SoftBank, OpenAI, and others collectively pledging to invest up to $500 billion to accelerate AI development in the U.S. through Project Stargate, announced in January, where will the digital oil rush take pure Bitcoin miners?

Kevin Dede, managing director of equity research at investment bank HC Wainwright, believes there is plenty of opportunity in both directions. In a recent episode of Mining Pod's Bitcoin Stock show, Dede noted that while he's not going to bet against miners who are serious about AI/HPC, he's also not going to underestimate the prospects of Bitcoin miners who are focused solely on it.

Will the launch of Stargate change the discussion about AI development opportunities for Bitcoin miners?

I think the conversation changed when Core Scientific announced a partnership with CoreWeave six to eight months ago. That really changed the dynamic. Another aspect that may be underestimated is that Bitcoin miners can compete at different scales. The Stargate project is focused on hyperscale facilities, but there are opportunities to implement at smaller scales as well.

BitDigital and Applied Digital have demonstrated that you don’t have to be hyperscale to succeed. There are many customers who need access to compute, and not all of them are hyperscalers.

Riot recently decided to pause their 600MW Corsicana 2 phase to evaluate it for AI/HPC. Why do you think they did that?

Riot has had activist investors buying the stock, which has had a positive effect on its price. The company has always been steadfast in its intention to continue mining Bitcoin. At an analyst meeting last June, CEO Jason Les said they were not going into HPC.

Riot’s setup in Corsicana is impressive. The question is: is 600 MW of HPC worth more than 600 MW of Bitcoin mining? I believe the answer is yes. Demand for HPC is growing and applications are evolving; we are just getting started. The real market is the enterprise sector, where companies are using AI to optimize processes.

If we look at Bit Digital and Core Scientific, which company's strategy do you think is more promising?

Let's start with BitDigital. They bought GPUs and rented a site in northern Iceland to meet the needs of one client, who I believe is somewhere in Europe, to run models. Now Iceland and Europe are not as close as you might think, which is important if they are running inference computations, as mainland Europe would be the main client for that.

The Enovum deal went through and they got their first site, which is about four megawatts. They also just opened another site that they hope to have powered by the summer, initially targeting five megawatts with plans to expand to 35 megawatts of HPC capacity this year. Sam Thapar, their CEO, often points out that this acquisition paved the way for a potential 288 megawatts of HPC capacity.

When it comes to assessing risk, it really comes down to a number of factors. Bit Digital acquired a company with a proven track record of building and operating these facilities. But that, of course, adds another layer of risk on top of the base execution risk. You layer on top of that the risk that they could run into problems building and operating the next set of facilities as the year progresses.

As for Core Scientific, I wouldn’t underestimate them. They’ve attracted some really great people. I asked their CEO Adam Sullivan about how their plans are shaping up. He said that in the existing data center world, there are a lot of people whose employees see limited growth opportunities. So if you’re an employee at one of these companies and you get an offer from Core Scientific with stock options, you think, “My options are in the double digits now, but this could go up to the high double digits or even triple digits.” That’s how they’ve managed to attract such great talent.

On the other hand, the new B200 chips they are using are much more powerful, but also significantly more complex, and that could play a role in the delays in CoreWeave deployments at Core Scientific sites. I think a lot of this will come out in Core Scientific's next earnings call in March. They will likely discuss whether they are still on track to launch the first major CoreWeave site in Q2, and how they have dealt with these networking issues.

Do you think the higher potential of AI/HPC will push Bitcoin mining into the background or will it be able to coexist with HPC and AI?

Source: cryptonews.net