Surge in Data Center Demand Amid AI Development Boom
Mining Industry Faces Profitability Decline Due to Halving
The mining industry, whose profitability has declined due to the Bitcoin halving, is aiming for a second leap forward with artificial intelligence (AI) data centers. This is because the global AI development boom has led to a surge in demand for high-performance infrastructure essential for training and inference. In the case of the mining industry, it is easy to convert mining equipment into AI data centers, and it is evaluated that entry into the business is relatively easy due to the network built with Nvidia.
Bloomberg reported on the 6th (local time) that as demand for AI data centers surges, cryptocurrency mining companies are generating profits by converting mining equipment into AI data centers.
A representative company quickly generating profits is Core Scientific. After confirming earlier that it could create about 500 MW (megawatts) of AI data center capacity in its mining infrastructure division, it signed a contract on the 3rd to supply 200 MW of power to CoreWeave, an AI startup supported by Nvidia. It is expected to generate about $3.5 billion in revenue over the next 12 years.
According to CNBC, another mining company, Bit Digital, generated about $4.1 million in revenue in one month as of the end of April with 251 AI data centers. Iris Energy is estimated to generate up to $17 million annually through AI cloud services.
There are complex reasons why the mining industry is rushing to promote AI data center businesses. The industry has been struggling due to the Bitcoin halving in April, which cut the total daily mining capacity in half. While more money is being invested in infrastructure for mining, profitability is not as good as before. On the other hand, as AI development competition spreads across all industrial sectors, the demand for AI data centers essential for data training and inference has exploded.
Accordingly, the mining industry has seen a series of diversification moves, such as converting cryptocurrency miners into AI data centers. The report explained, “For the mining industry, the entry barrier is low because you simply have to convert mining machines into AI data centers,” adding, “The energy-intensive process of solving mathematical puzzles for mining can be utilized in AI data centers.”
Global investment bank Morgan Stanley recently emphasized in a report that the business potential of AI data centers is much higher than that of mining machines. According to digital asset firm CoinShares, if the mining industry moves into AI data center operations, it requires up to 20 times the capital expenditure compared to Bitcoin mining, but profitability is higher. James Butterfill, Head of Research at CoinShares, stated, “The infrastructure of the Bitcoin mining industry is ideal for AI operations,” emphasizing, “Their AI activities can expand gross profit margins.”
Another strength of the mining industry as AI data centers is the relatively easy access to Nvidia’s graphics processing units (GPUs). Having maintained relationships as Nvidia GPU customers for decades for cryptocurrency mining, they are evaluated not to be deprioritized in supply order.
The market currently also views the mining industry’s moves in line with the AI boom positively. The ‘Valkyrie Bitcoin Mining ETF (WGMI),’ composed of Bitcoin mining companies, surged about 30% in the past month.
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