Texas miners leave crypto for next new wave

Lancium President Ali Fenn told CNBC that at full capacity, this will be one of the largest AI data center campuses in the world, in the latest example that the race to power AI — and leave bitcoin mining behind — is accelerating.

“Data centers are rapidly evolving to support modern AI workloads, requiring new levels of high density rack space, direct-to-chip liquid cooling and unprecedented overall energy demands,” said Chase Lochmiller, Crusoe’s co-founder and CEO.

There are a lot of synergies between the bitcoin mining and AI infrastructure businesses.

Mining firms have expansive data centers, with access to fiber lines and large amounts of power across the U.S. They’re exactly the types of facilities needed for compute-intensive AI operations, which means their sites and technology are in high demand.

Meanwhile, miners need to diversify. Following the bitcoin halving in April, an event that happens about once every four years, the business of generating new tokens has become much less profitable. JPMorgan Chase analysts wrote in a report in June that “some operators are feeling the financial pinch from the recent block reward halving, which cut industry revenues in half, and are actively exploring exit strategies.”

With the burgeoning AI industry in need of capacity and bitcoin miners in search of new ways to generate returns on their hefty investments, mergers, financings and partnerships are rapidly coming together.

Lancium and Crusoe join a long list of miners looking to trade bitcoin for AI, and so far, the strategy appears to be working.

The combined market capitalization of the 14 major U.S.-listed bitcoin miners tracked by JPMorgan hit a record high of $22.8 billion on June 15 — adding $4.4 billion in just two weeks, according to a June 17 research note from the bank.

Bit Digital, a bitcoin miner that now derives an estimated 27% of its revenue from AI, said in June that it had entered into an agreement with a customer to supply Nvidia GPUs over three years at a data center in Iceland, in a deal that is expected to generate $92 million in annual revenue. It’s paying for the GPUs, in part, by liquidating some of its crypto holdings.

Hut 8, based in Miami, said it raised $150 million in debt from private equity firm Coatue to help it build out its data center portfolio for AI.

Hut 8 CEO Asher Genoot recently told CNBC his company “finalized commercial agreements for our new AI vertical under a GPU-as-a-service model, including a customer agreement which provides for fixed infrastructure payments plus revenue sharing.”

The pivot to AI has been going especially well for Core Scientific, which emerged from bankruptcy in January.

On Tuesday, B. Riley upgraded its stock to buy from neutral and raised its price target on shares to $13 from $0.50, citing the company’s recent spate of deals with CoreWeave, an Nvidia-backed startup that’s one of the main providers of the chipmaker’s technology for running AI models.

Last month, CoreWeave offered to buy Core Scientific for $1.02 billion, not long after the pair announced an expansion of their existing partnership. Core Scientific rejected the bid. The company is currently worth about $2 billion.

For years, Crusoe’s work has been virtually synonymous with the bitcoin mining industry.

Crusoe’s technology helps oil companies to turn wasted energy, or flare gas, into a useful resource. Many bitcoin miners, with the help of Crusoe, have set up machines adjacent to these sites in order to capitalize on this cheaper power source. Starting in 2021, for example, ExxonMobil began working with Crusoe to mine bitcoin in North Dakota.

But Crusoe’s Lochmiller told CNBC that AI infrastructure has actually been part of the vision since the company’s founding six years ago.

“We’re reimagining AI infrastructure from the ground up – from our energy solutions, to the design, engineering and building of our specially-designed AI data centers, to our manufacturing capabilities with Crusoe Industries for key electrical data center infrastructure and ultimately to our purpose-built AI computing stack,” he said.

The facility in Abilene, which is expected to go live in 2025, is also planning to draw primarily from renewable energy sources.

“Our power orchestration technology is positioned to ensure that mega-scale AI data center campuses can be assets to the grid, not liabilities,” Lancium’s Fenn told CNBC.

Lancium has patented technology that allows it to turn the demand of energy buyers into a sort of dial that can be incrementally turned up or down in as little as five seconds. This helps to balance out a power grid that has…