Six months following the recent Bitcoin halving, mining companies are increasingly pivoting towards the field of artificial intelligence (AI) amid a turbulent cryptocurrency market and a significant drop in revenue streams.
The April halving event, which halved mining rewards from 6.25 to 3.125 Bitcoins per block, has made the process of mining increasingly costly. Currently, the average cost to mine one Bitcoin stands at approximately $49,500, a slight increase from $47,200 in the first quarter of the year. Despite these costs, many mining companies remain profitable at current Bitcoin prices.
Notably, companies like Cormint and TeraWulf have achieved the lowest mining costs, producing Bitcoin at $15,000 and $19,000 respectively. For miners facing electricity costs exceeding $40,000, it becomes economically sensible to halt operations and adopt a “HODL” strategy—holding onto their Bitcoin in anticipation of future price increases.
In response to the emerging AI sector, many larger mining operations are adapting their infrastructure to cater to AI companies. This pivot is driven by the escalating demand for energy caused by the AI boom. For instance, a report from Goldman Sachs indicates that a single ChatGPT query consumes ten times the energy of a typical Google search. Consequently, AI firms seek out affordable power sources and expansive spaces to house numerous supercomputers and cooling systems. Moreover, constructing a data center can be a lengthy and costly process, often involving complex regulations and administrative hurdles.
Bitcoin miners are well-positioned to meet the energy and space requirements of AI companies, while also seeking stable revenue streams to offset the decreased profits resulting from the halving. Reports suggest that AI operations can be as much as 25 times more profitable than Bitcoin mining per kilowatt-hour. As a result, several mining companies are either integrating AI capabilities into their existing operations or transitioning entirely from Bitcoin mining to AI. This shift not only broadens their operational scope but also enhances profit margins by maximizing energy use. Researcher Margot Paez from BPI indicates that this trend is likely to persist as long as the revenue generated from AI per megawatt-hour remains higher than that of Bitcoin.
Additionally, Bloomberg reports that the stock price of Core Scientific, a Bitcoin mining firm, surged following the establishment of a multi-billion dollar contract with AI company CoreWeave. These moves demonstrate Core Scientific’s strategic shift towards functioning as a data center operator rather than solely a Bitcoin miner, helping the company navigate the challenging cryptocurrency environment and avoid bankruptcy. According to TIME, Core Scientific’s CEO, Adam Sullivan, has noted that AI companies can purchase mining sites for higher values than those offered by Bitcoin miners.
However, challenges remain. While partnerships between Bitcoin miners and AI firms can be mutually beneficial, the current pool of partners is primarily limited to large tech companies and well-capitalized AI startups. Although there are some technical similarities between AI and Bitcoin mining, their operational requirements diverge significantly. Expert Anibal Garrido highlights that Bitcoin miners typically utilize ASIC machines optimized for Proof of Work calculations, which cannot be repurposed for AI applications. Moreover, AI supercomputers operating continuously require sophisticated cooling solutions, in contrast to the basic cooling systems used in Bitcoin mining.
Marathon Digital Holdings CEO Fred Thiel compares the current AI trend to the dot-com boom of the early 2000s; however, he cautions that smaller mining companies may risk overextending without a sufficient customer base. If AI companies fail to generate revenue, miners could encounter financial challenges. Nonetheless, Thiel remains optimistic about the potential for AI to transform the Bitcoin mining landscape, suggesting that miners could become vital energy partners for AI data centers, leveraging low-cost energy sources to enhance profitability and efficiency while positioning themselves as significant players in the burgeoning AI sector.