Written by: Zhou Yixiao, Silicon Star Pro
After Trump won the U.S. presidential election, the market expected him to loosen regulations on cryptocurrencies. Trump had previously stated that Bitcoin mining should be concentrated in the U.S., but this policy could impact the AI industry. In the early hours of November 23, Bitcoin prices briefly reached $99,660, hitting a new all-time high and approaching the $100,000 mark.
Because both Bitcoin mining and AI training require a large amount of energy and computing power. The simultaneous development of both is bound to create competition for electricity and hardware resources. This means that the AI training business may be affected by fluctuations in Bitcoin prices, especially when miners compete for limited hardware resources. In other words, an increase in Bitcoin prices may drive up the costs of AI training.
AI VS BTC
With the tremendous success of ChatGPT, AI companies are competing to train and run their own models, hoping to surpass OpenAI's flagship product. This has generated a massive demand: the reasoning process of AI models is much more complex than the indexing and retrieval process of search engines, and the energy consumed by a single ChatGPT query is about ten times that of a Google search.
This has made AI companies urgently seek cheap energy and large tracts of land to accommodate related equipment. In North America, some regions have implemented a queue system waiting for large data centers to connect to the power grid. However, once a company receives preliminary approval, building a data center from scratch may take years, cost millions of dollars, and go through a lengthy regulatory and administrative approval process.
Internationally, large-scale Bitcoin mining has always been an extremely profitable business. However, it is also affected by the highly volatile cryptocurrency market. After the cryptocurrency market crash in 2022, many miners were forced into bankruptcy or completely shut down their businesses.
In 2023 and early 2024, mining companies that survived the market downturn reaped profits. However, this year's Bitcoin halving (the miner's reward is halved) has not triggered the dramatic rise in Bitcoin prices seen in previous cryptocurrency cycles, which would offset the impact of the reduced rewards. Since April of this year, the long-term sideways movement of Bitcoin prices has compressed miners' profit margins, forcing some miners to seek business model diversification to hedge against the risks of cryptocurrency price fluctuations.
Four years ago, when the data center and Bitcoin mining company IREN considered entering AI training, they believed that from a business perspective, the business volume at that time was still insufficient. But now, an increasing number of large Bitcoin mining companies have begun to replace some of their mining equipment with devices used for running and training AI systems. These companies believe that providing computing power for AI companies may yield a safer and more stable source of income than mining.
Today, the collaboration between artificial intelligence and the Bitcoin mining industry is a natural fit; both parties have compatible needs. AI companies need the existing sites, cheap energy, and infrastructure already accessed by Bitcoin miners. Meanwhile, Bitcoin miners pursue the stable income that AI business can bring and the potential profits from the current AI boom.
Some Bitcoin mining companies choose to lease their sites to AI clients. In June of this year, Bitcoin mining company Core Scientific, which was on the brink of bankruptcy in 2022, announced it would host over 200 megawatts of GPU for AI startup CoreWeave. Core Scientific stated that AI companies have begun purchasing mining sites at prices higher than the mining market, referring to Bitcoin mining facilities as 'power shells in the data center industry.'
Other Bitcoin mining companies operate GPUs themselves. Bitcoin mining company Hut 8 received a $150 million investment from Coatue Management to build AI infrastructure. Some facilities of the Australia-based mining company IREN share space for GPUs used for AI and ASIC devices used for Bitcoin mining. Bitcoin brings immediate income but is highly volatile. AI relies on customers; once there are customers, it becomes more stable. Nasdaq-listed Bitdeer is also building its own AI data center in Singapore.
A business that looks beautiful
However, only a few overseas mining companies can achieve this transformation. Secondly, the equipment used for mining Bitcoin is called ASIC, which stands for Application-Specific Integrated Circuit, meaning it cannot be used for other tasks. Mining companies cannot seamlessly transition mining equipment into AI scenarios.
An AI Infra industry practitioner told Silicon Star, 'For example, the model training generally uses H100, while mining uses 4090.'
In other words, to serve the AI industry, Bitcoin miners must purchase brand new equipment, and the requirements of data centers for artificial intelligence differ from those for Bitcoin mining. Entering a brand new and highly complex industry is fraught with difficulties, not to mention having to compete with well-funded tech giants like Google, Amazon, and Microsoft.
Therefore, not all mining companies can replicate the high-level cooperation between Core Scientific and CoreWeave. Especially smaller miners, who actually have little to offer to the AI industry.
Domestic virtual currency mining has been banned, and there are no miners transitioning to AI. However, companies in other industries wish to share in the AI wave; they either directly enter the market or establish computing power subsidiaries to engage in 'computing power leasing' business. According to statistics, there are more than 100 listed companies in the A-share computing power leasing concept, including 'lottery printing king' Hongbo Co., and 'MSG king' Lianhua Holdings, among others. On video platforms, there are even posts like 'I sold a house in my hometown, bought 800 graphics cards, and partnered with my middle school classmates to do computing power leasing.'
In an ideal scenario, the business model of computing power leasing only requires initial investment in GPU server equipment, hosting the hardware in professional intelligent computing centers, and then leasing the computing power to end users, with hardware maintenance and software services handled by the intelligent computing center.
However, in reality, this may not be a good business. The demand for computing power leasing comes from the development of the AI large model industry, while the leasing costs for high-end hardware used in AI training are rapidly decreasing. Featherless.Ai CEO Eugene Cheah pointed out that the rental price of overseas H100 once reached $8 per hour, but has now fallen to below $2 per hour. This is mainly because some companies signed computing power leasing contracts early to avoid idle capacity waste and started reselling reserved computing resources, while most in the market chose open-source models, leading to reduced demand for new models.
The domestic computing power leasing market is also experiencing a similar 'computing power surplus' phenomenon, but 'the leasing market is unlikely to lower prices because they were all bought at high prices initially,' a practitioner in the intelligent computing industry told Silicon Valley Star.
'Still this fast'
There is a saying in the crypto circle: 'computing is power', which has now circulated into the AI circle.
Behind computing power is energy, and there is a close relationship between developed countries and high energy consumption, as can be seen when comparing per capita electricity generation (kilowatt-hours, kWh). In other words, acquiring surplus energy is a necessary condition for the advancement of civilization. After all, new levels such as manufacturing, transportation, public services, urbanization, and computing are layered on top of basic survival levels like agriculture, all of which require energy support.
In this dimension, the infrastructure originally established to serve cryptocurrencies is now providing solutions for the computing power needs of the AI era. This is undoubtedly an opportunity for the overseas digital currency mining industry, which has always hoped to rid itself of speculation. As long as this trend continues, leading manufacturers will benefit from the enthusiasm and liquidity brought by AI.
In every wave of technological innovation, there is always a 'gold rush'. For speculators within it, what they pursue is always profit itself, regardless of whether the underlying asset is digital currency, artificial intelligence, or the tulips of three hundred years ago.
After Bitcoin halving, some miners face a dilemma: either continue mining and hoarding coins, hoping for an increase in Bitcoin prices, or transform into AI data centers, hoping to ride the AI wave and make a quick profit. Now that Bitcoin prices have reached a new high, some people are starting to lament: 'Still this fast.' But there is another saying in the crypto circle: 'Holding coins is harder than holding a mistress.'
As people oscillate between the crypto circle and the AI circle, this repetitive process reminds one of Keynes' words: speculators do not care who is the most beautiful; they only care who will be chosen in the beauty contest.
And this 'beauty contest' will continue indefinitely.
