Cattle graze on the Buffalo Gap Wind Power project in Taylor and Nolan counties just south of Abilene, Texas.
Robert Daemmrich | Corbis | Getty Images
Just off of Interstate 20, in the guts of West Texas, is a town of 125,000 people called Abilene. Once a stopping point along a cross-country cattle trail in the times of the American Old West, the small outpost is now entering into the burgeoning artificial intelligence business.
Houston-based tech company Lancium and Denver-based Crusoe Energy Systems announced on Thursday morning a multibillion-dollar deal to construct a 200-megawatt data center just outside Abilene that’s designed to “meet the unique needs of AI corporations” — similar to enabling advanced cloud computing for applications like medical research and aircraft design. It’s the primary phase of a bigger 1.2-gigawatt build-out.
Lancium President Ali Fenn told CNBC that at full capability, this will probably be one in all the most important AI data center campuses on this planet, in the newest 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 recent 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 numerous synergies between the bitcoin mining and AI infrastructure businesses.
Mining firms have expansive data centers, with access to fiber lines and huge amounts of power across the U.S. They’re precisely the varieties of facilities needed for compute-intensive AI operations, which implies their sites and technology are in high demand.
Meanwhile, miners must diversify. Following the bitcoin halving in April, an event that happens about once every 4 years, the business of generating recent tokens has develop into 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 capability and bitcoin miners looking for recent ways to generate returns on their hefty investments, mergers, financings and partnerships are rapidly coming together.
Bitcoin miners pivot to AI
Lancium and Crusoe join a protracted list of miners seeking to trade bitcoin for artificial intelligence, and thus 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 only two weeks, based on 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 produce Nvidia GPUs over three years at an information center in Iceland, in a deal that is anticipated to generate $92 million in annual revenue. It’s paying for the overall processing units, partially, by liquidating a few of its crypto holdings.
Hut 8, based in Miami, said it raised $150 million in debt from private equity firm Coatue to assist it construct out its data center portfolio for AI.
Hut 8 CEO Asher Genoot recently told CNBC his company “finalized business agreements for our recent 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 purchase from neutral and raised its price goal on the shares to $13 from 50 cents, citing the corporate’s recent spate of deals with CoreWeave, an Nvidia-backed startup that is one in all the fundamental providers of the chipmaker’s technology for running AI models.
Last month, CoreWeave offered to purchase Core Scientific for $1.02 billion, not long after the pair announced an expansion of their existing partnership. Core Scientific rejected the bid. The corporate is currently value about $2 billion.
Beefing up the grid
For years, Crusoe’s work has been virtually synonymous with the bitcoin mining industry.
Crusoe’s technology helps oil corporations to show wasted energy, or flare gas, right into a useful resource. Many bitcoin miners, with the assistance of Crusoe, have arrange machines adjoining to those sites with a view to capitalize on this cheaper power source. Starting in 2021, for instance, Exxon Mobil began working with Crusoe to mine bitcoin in North Dakota.
But Crusoe’s Lochmiller told CNBC that AI infrastructure has actually been a part of the vision because the company’s founding six years ago.
“We’re reimagining AI infrastructure from the bottom up – from our energy solutions, to the design, engineering and constructing 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 ability in Abilene, which is anticipated to go live in 2025, can be planning to attract primarily from renewable energy sources.
“Our power orchestration technology is positioned to make sure that mega-scale AI data center campuses might be assets to the grid, not liabilities,” Lancium’s Fenn told CNBC.
Lancium has patented technology that enables it to show the demand of energy buyers right into a type of dial that might be incrementally turned up or down in as little as five seconds. This helps to balance out an influence grid that has inherently volatile energy sources like wind and solar energy.
“Lancium’s original vision was to bring large-scale loads to locations with the perfect, abundant renewable energy with a view to facilitate the energy transition,” said Fenn.
Back in 2018, Fenn says that the one load that was a superb fit for this was bitcoin mining.
One among bitcoin’s biggest features is that it is completely location agnostic. Miners only require an influence source and a web connection, unlike other industries that have to be relatively near their end users.
In some cases, the built-in proceeds from minting cryptocurrency have offered enough of a financial incentive to make it value it to construct the infrastructure crucial to harness previously untapped sources of power — especially in Texas, which is understood for being a mecca for renewable energy sources like wind and solar.
Bitcoin miners are also flexible electricity consumers — essentially, they function as buyers who will take as much power as they’re given, regardless of the time of day, and are only as willing to power down with a number of seconds’ notice.
But Lancium’s strategy has since shifted to AI.
“Traditional data centers were – and still are – optimized principally for proximity to urban areas and users,” said Fenn. “That has all modified now, with AI data centers optimized for large scale energy availability, cost and greenness. Our vision, campuses and technology are perfectly positioned for this significantly larger, expanded opportunity.”
In the following one to 2 years, Needham analysts estimate that giant publicly traded bitcoin miners are expected to greater than double power capability, including each their mining and HPC business expansion plans.
The Electric Power Research Institute estimates that data centers could take as much as 9% of the country’s total electricity consumption by 2030, up from around 4% in 2023. Tapping into nuclear energy is seen by many as the reply to meeting that demand.
TeraWulf powers its mining sites with nuclear energy, and is seeking to get into machine learning. To this point, the firm has 2 megawatts dedicated to high-performance computing capability, though it has plans to transition its energy infrastructure toward AI and HPC.
OpenAI CEO Sam Altman told CNBC last 12 months that he’s an enormous believer in nuclear in terms of serving the needs of AI workloads.
“I do not see a way for us to get there without nuclear,” Altman said. “I mean, perhaps we could get there just with solar and storage. But from my vantage point, I feel like that is the probably and the perfect strategy to get there.”
