Crypto Miners Pivot to AI

We don’t need to go into the details. It’s quite obvious that AI is the hot thing right now.

You might even say that AI is what crypto was in 2018.

Whether it is companies, venture funds, or your nutty uncle, everyone is trying to convince you they are “in” on AI in some way.

And, yes, that includes crypto companies.

You’d be remiss not to think this is just another Long Island Blockchain moment. Remember them? The company that changed its name from Long Island Iced Tea Corp to Long Island Blockchain in order to pump its stock price and was ultimately shut down by the SEC?

We are in the early stages of that exactly. So much so that we even have crypto companies pivoting their brands away from crypto to highlight how they are focusing on AI.

And so this week when we saw that HIVE Blockchain Technologies (HIVE) was changing its name to HIVE Digital Technologies (HIVE) to pursue AI projects, our first instinct was to roll our eyes.

But read further and dig deeper, and the move might actually make sense. Let us explain…

The Mad Dash For GPU Chips

The crypto mining process on face value is a fairly simple one.

You buy a lot of expensive chips (GPUs & ASICs), add electricity, and poof, magic internet money appears.

Chips + Electricity = Crypto. 

Obviously it’s a little more complex than that, but for explanation, it’s close enough.

The goal for the miner is to make the right side of the equation higher than the left. That is, to make a profit.

But because miners get paid in the crypto they mine, when crypto prices are low, the cost of mining exceeds the value of the reward.

Now for some miners, such as Hut 8, that is fine. They believe so much that the future price of BTC will be worth more that they are willing to take a short term loss. But at the end of the day, if the crypto miner can make more money allocating their chips and electricity to something other than crypto, why wouldn’t they?

And that’s precisely where we are today.

As the whole world is shifting to AI, it needs as many high powered chips as it can get its hands on.

Simply put, high-end computer chips are the new oil.

And if that’s the case, then crypto miners are sitting on a gusher.

As we explained above, crypto miners for years have been hoarding chips in order to mine crypto. And just when it was starting to look like shutting off GPU miners was the best move with faltering crypto prices, AI emerged, giving miners a perfect pivot.

Now, here is where we should note that not every miner will be able to pivot. That’s because the kinds of chips that are needed to train AI models are not the same kind of chips needed to mine Bitcoin (ASICs). The kinds of chips needed are GPUs. Most miners have these, but not all.

But regardless, all of these miners have everything else that is needed in place to pivot – management, energy, real estate (sometimes close to a renewable energy source such as hydropower), and supply chains to procure more chips.

Which Crypto Miners Are Pivoting to AI?

• HIVE (HIVE): As we covered above, HIVE recently dropped “Blockchain” from its name as it makes a push into AI. The company stated that it plans to provide its 38,000 Nvidia GPUs as an alternative to the major existing cloud providers.

• CoreWeave: A NYC-based startup that got its start as an ETH mining venture, has now raised more than $575 million to transition into providing cloud services to AI companies such as Microsoft.

• IRIS energy (IREN): The company last month announced an expansion plan to 9.1 EH/s from 5.6 EH/s and revitalization of its high-performance computing data center strategy.

• Applied Digital Corporation (APLD): On June 23, the company announced that it had signed a deal to host AI cloud computing loads in its data centers in an agreement that could be worth as much as $460 million over 36 months. This follows an announcement in May with Supermicro (SMCI) for AI and cloud offerings.