Texas miners are leaving cryptocurrency to join the new wave

Just off Interstate 20, in the heart of West Texas, lies Abilene, a city of 125,000 people. Once a rest stop along a transcontinental cattle road during the American Wild West, this tiny outpost is now tapping into the burgeoning business of artificial intelligence.

Houston-based technology company Ransium and Denver-based Crusoe Energy Systems announced a multibillion-dollar deal Thursday morning to build a 200-megawatt data center outside Abilene that’s designed to “meet the unique needs of AI companies,” including enabling advanced cloud computing for applications like medical research and aircraft design. It’s the first phase of a larger, 1.2-gigawatt build.

When fully operational, the facility will be one of the world’s largest AI data center campuses, Lansium President Ari Feng told CNBC, marking the latest example of the growing race to power and harness AI. Bitcoin Mining behind us is accelerating.

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

There are many synergies between Bitcoin mining and AI infrastructure businesses.

Mining companies own vast data centers across the U.S. with access to fiber optic lines and lots of power. These are exactly the types of facilities needed for compute-intensive AI operations, meaning their sites and technology are in high demand.

Meanwhile, miners need to diversify their business. After Bitcoin’s halving in April (an event that occurs roughly once every four years), minting new tokens became much less profitable. “Some miners are feeling the financial hit from the recent block reward halving that halved industry revenues and are actively exploring exit strategies,” JPMorgan Chase analysts wrote in a June report.

Mergers, fundraising and partnerships are happening at a rapid pace as the burgeoning AI industry needs capabilities and bitcoin miners look for new ways to profit from their hefty investments.

Lancium and Crusoe join a long list of miners considering swapping Bitcoin for AI, and so far, the strategy appears to be working.

The combined market capitalization of 14 U.S.-listed bitcoin mining companies tracked by JPMorgan hit an all-time high of $22.8 billion on June 15, up $4.4 billion in just two weeks, the bank said in a June 17 research note.

Bitcoin miner BitDigital is estimated to currently derive 27% of its revenue from AI. Said In June, the company announced it had signed a three-year contract with a customer to supply NVIDIA GPUs to data centers in Iceland, which is expected to generate $92 million in annual revenue. The company is covering part of the cost of the GPUs by selling some of its cryptocurrency holdings.

Miami-based Hut 8 Raises $150 million in debt financing from private equity firm Coatue Help build a data center portfolio for AI.

Hut 8 CEO Asher Genuto recently told CNBC that the company has “signed new AI commercial deals based on a GPU-as-a-service model, including customer agreements that provide for fixed infrastructure payments and revenue sharing.”

The shift to AI is progressing particularly well. Core ScientificThe company emerged from bankruptcy in January.

On Tuesday, B. Riley upgraded the company’s shares to buy from neutral and increased its price target to $13 from $0.50, citing the company’s recent string of transactions with CoreWeave., The Nvidia-backed startup is one of the chipmaker’s main providers of technology to run AI models.

Last month, CoreWeave offered Shortly after the two companies announced the expansion of their existing collaboration, the company announced plans to acquire Core Scientific for $1.02 billion. Core Scientific rejected the offer. The company’s current market capitalization is about $2 billion.

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

Crusoe’s technology helps oil companies turn wasted energy and flared gas into useful resources, and many bitcoin miners are enlisting Crusoe’s help to set up machines next to these sites to take advantage of this cheap source of electricity. For example, ExxonMobil began mining Bitcoin in North Dakota in 2021 in partnership with Crusoe.

But Crusoe’s Lochmiller told CNBC that AI infrastructure had actually been part of the company’s vision from the start six years ago.

“We are rethinking AI infrastructure from the ground up, from energy solutions, to designing, engineering and building purpose-built AI data centers, to manufacturing capabilities with Crusoe Industries for primary electric data center infrastructure, and ultimately to a purpose-built AI computing stack,” he said.

The Abilene facility, scheduled to begin operation in 2025, also plans to be powered primarily by renewable sources.

“Our power orchestration technology ensures that mega-scale AI data center campuses become an asset, not a liability, to the power grid,” Lansium’s Feng told CNBC.

Ransium has patented technology that can turn energy buyers’ demand into a sort of dial that can be stepped up or down in as little as five seconds, helping to balance power grids with inherently volatile energy sources such as wind and solar power.

“Ransium’s original vision was to bring large-scale loads to places where renewable energy is abundant and best suited to power the energy transition,” Feng said.

Feng said that back in 2018, the only load suitable for this was bitcoin mining.

One of the greatest features of Bitcoin is that it is completely location-independent: miners only need a power source and an internet connection, unlike other industries where miners must be relatively close to the end user.

In some cases, the revenue generated by issuing cryptocurrencies provides enough of an economic incentive to make it worthwhile to build the infrastructure needed to tap into previously untapped sources of electricity, particularly in Texas, known as a mecca for renewable energy sources like wind and solar.

Bitcoin miners are also flexible electricity consumers, meaning they essentially act as buyers of a given amount of electricity regardless of the time of day, and are happy to stop supplying power with just a few seconds’ notice.

But then Lancium’s strategy shifted to AI.

“Traditional data centers were, and still are, primarily optimized for urban areas and proximity to users,” Feng said. “Now that’s all changed, and AI data centers are optimized for energy availability, cost and greenness at scale. Our vision, campuses and technology are perfectly poised to address this vastly expanded opportunity.”

Needham analysts expect the largest publicly traded bitcoin miners to more than double their power capacity over the next one to two years, including to accommodate expansion plans for their mining and HPC businesses.

of Electric Power Research Institute estimates Data centers’ share of the country’s electricity consumption could grow from about 4% in 2023 to as much as 9% by 2030. Many see the use of nuclear energy as the answer to meeting this demand.

TeraWulf uses nuclear energy for its mining facilities and is also looking to get into machine learning. Currently, the company has 2 megawatts dedicated to HPC capacity, but has plans to transition its energy infrastructure to AI and HPC.

OpenAI CEO Sam Altman told CNBC last year that he sees great potential in nuclear power when it comes to serving the needs of AI workloads.

“I don’t know how we get there without nuclear,” Altman said, “I mean, maybe we could get there with just solar and storage. But from my perspective, I feel like this is the most likely and best way to get there.”