Crypto miners are harnessing their advanced equipment and low-cost energy for the burgeoning artificial intelligence sector. As the demand for computational power soars, these miners are uniquely positioned to profit from the AI boom.
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LifestyleTranscript
00:00Today on Forbes, why these Bitcoin miners are becoming summer's hot AI stocks.
00:08Energy has become the hot commodity in the artificial intelligence world.
00:13Take cloud computing provider CoreWeave, which in early June inked a $3.5 billion deal with
00:19Core Scientific.
00:21The agreement involves CoreWeave paying $290 million annually over 12 years to the Austin-based
00:27Bitcoin miners' data centers to host AI-related computing hardware.
00:33CoreWeave will also cover all capital expenditures.
00:36The deal was so good that Core Scientific's stock doubled to $10 in early June, leading
00:41some observers to view the company as the new so-called, quote, picks and shovels play
00:46for AI.
00:48On June 26th, CoreWeave announced a second contract, this one projected to bring Core
00:53Scientific $1.2 billion in revenue in the coming years.
00:58Core Scientific emerged from bankruptcy in January and is one of the largest Bitcoin
01:03miners in North America.
01:05The soaring demand for heavy-duty computer capacity is driven by AI applications such
01:10as ChatGPT.
01:12Its queries require 10 times the electricity of traditional Google searches.
01:17That immense power demand is putting a premium on companies like Core Scientific that have
01:22access to cheap power in states such as Texas and North Dakota, and agreements to tap more
01:27energy from elsewhere.
01:29Having sufficient power available now is vital when you consider that building high-performance
01:34computing, or HPC, data centers from scratch typically takes three to five years, with
01:41current wait times for electrical grid connections stretching up to six.
01:46This according to the Lawrence Berkeley National Laboratory Research Center.
01:50Adam Sullivan, Core Scientific's CEO, says, quote,
01:54The demand is insatiable.
01:56If we just execute on what is within our current contracted power today, we'd be a top-ten
02:01data center company in the United States hosting a very significant portion of AI that's done
02:06in the United States over the coming years.
02:09We've been working very closely with NVIDIA and a number of different partners on the
02:12development and design of what's required to operate these chips.
02:18Since Core Scientific's announcement of the first CoreWeave contract on June 3, the aggregate
02:23market value of 14 U.S.-listed Bitcoin miners surged by 22 percent, according to research
02:29by J.P. Morgan.
02:31This is a stark contrast to the 12 percent decline in Bitcoin and a 4 percent rise in
02:35the S&P 500.
02:38The 14 miners control about 5 gigawatts of power and can spare 3.6 gigawatts of that
02:44for high-performance computing, according to a June 24 research report by J.P. Morgan.
02:50They also have purchase agreements for an additional 4.5 gigawatts from new power plants
02:54in various stages of construction and permitting.
02:58That new energy is enough to support about 3.4 million households for a year, and it
03:03could come in handy.
03:05Driven by the AI boom, data centers' energy demand could surge to 9 percent of U.S. power
03:11generation by 2030, according to the Electric Power Research Institute.
03:16This projected increase is more than double the current usage.
03:20But the miners cannot easily repurpose their excess electric capacity for AI.
03:25Wes Cummins, CEO of data center developer Applied Digital, says, quote,
03:30Near-term, power is extremely hard to find in large quantities, and that's the big asset
03:35a lot of the U.S. Bitcoin miners have right now.
03:38But those power contracts are valuable if they have the other pieces that go along with
03:42it, primarily fiber connectivity.
03:46Cummins mentions fiber because fiber-optic cabling is crucial in high-performance computing
03:51because it is what enables high-speed data transfers.
03:55Kevin Deed, an analyst at H.C. Wainwright, notes, quote,
03:59Bitcoin purists will push back and say, no, you can't host AI machines in a Bitcoin mining
04:04data center.
04:05OK, I get it.
04:06You can't.
04:07You need cleaner air and better cooling.
04:10But he adds that smaller AI players that may not have an appetite for quite the same computing
04:15and power provided by hyperscalers — that's companies with massive data centers and cloud
04:20infrastructure such as Amazon's AWS, Microsoft Azure and Google Cloud — could better integrate
04:27with the level of service range Bitcoin miners are accustomed to delivering, which may ultimately
04:32lead to a Bitcoin mining HPC data center hybrid.
04:37There is evidence that investors agree.
04:40In a June 21st research note, Mark Palmer, an analyst at investment banking firm Benchmark,
04:45wrote,
04:46Listed Bitcoin mining stocks have re-rated during the past three weeks as the value of
04:51the miners' power assets has come to the fore.
04:55The average enterprise value-revenue multiple of a selected group of listed miners, including
05:00IREN, Terrewolf and BitDigital, is now at 7.8x, up from 5.2x two months ago.
05:09For full coverage, check out Nina Bambasheva's piece on Forbes.com.
05:15This is Kieran Meadows from Forbes.
05:17Thanks for tuning in.