Written by: Zhou Yixiao, Silicon Star Pro
After Trump won the US presidential election, the market expected him to relax regulation on cryptocurrencies. Trump once said that Bitcoin mining would be concentrated in the United States, but this policy may have an impact on the AI industry. In the early morning of November 23, the price of Bitcoin once reached $99,660, setting a new record high and moving towards the $100,000 mark.
Because both Bitcoin mining and AI training require a lot of energy and computing power. The simultaneous development of the two is bound to create competition for electricity and hardware resources. This means that the AI training business may be affected by Bitcoin price fluctuations, especially when miners compete for limited hardware resources. In other words, the rise in Bitcoin prices may lead to an increase in AI training costs.
AI VS BTC
With ChatGPT’s huge success, AI companies have been racing to train and run their own models, hoping to outperform OpenAI’s flagship product. This has created a lot of demand: the reasoning process of AI models is much more complex than the indexing and retrieval process of search engines, and a ChatGPT query consumes about ten times the energy of a Google search.
This has left AI companies eager to seek cheap energy and large tracts of land to house related equipment. In North America, some regions have implemented a queuing system to wait for large data centers to be connected to the power grid. However, once a company obtains preliminary approval, building a data center from scratch may take years, millions of dollars, and a lengthy regulatory and administrative approval process.
Internationally, large-scale Bitcoin mining has historically been an extremely profitable business. However, it has also been affected by the volatile cryptocurrency market. After the 2022 cryptocurrency market crash, many miners were forced into bankruptcy or shut down their operations entirely.
Mining companies that survived the market downturn in 2023 and early 2024 reaped profits. However, this year’s Bitcoin halving (a reduction in the reward for miners) did not trigger a sharp rise in Bitcoin prices to offset the impact of the reduction in rewards, as in previous cryptocurrency cycles. The long-term sideways movement of Bitcoin prices since April this year has squeezed miners’ profit margins, forcing some miners to seek to diversify their business models to hedge against the risk of cryptocurrency price fluctuations.
Four years ago, when IREN, a data center and Bitcoin mining company, considered getting involved in AI training, they thought that the business volume at the time was not enough from a commercial perspective. But now, more and more large Bitcoin mining companies have begun to replace some of their mining equipment with equipment used to run and train AI systems. These companies believe that providing computing power to AI companies may provide a safer and more stable source of income than mining.
Today, the cooperation between artificial intelligence and the Bitcoin mining industry is a natural progression, as the needs of both parties match. AI companies need the existing sites, cheap energy and infrastructure that Bitcoin miners already have, while Bitcoin miners seek the stable income brought by AI business and the potential profits brought by the current AI boom.
Some Bitcoin mining companies choose to lease their sites to AI customers. In June, Core Scientific, a Bitcoin mining company on the verge of bankruptcy in 2022, announced that it would host more than 200 megawatts of GPUs for AI startup CoreWeave. Core Scientific said AI companies have begun to buy mining sites at prices above the mining market, and they called Bitcoin mining facilities "the power shell of the data center industry."
Other bitcoin mining companies operate their own GPUs. Bitcoin mining company Hut 8 received $150 million in investment from Coatue Management to build AI infrastructure. In some facilities of Australia-based mining company IREN, GPUs for AI and ASIC equipment for bitcoin mining share the same space. Bitcoin brings immediate income, but it is more volatile. AI relies on customers, and once you have customers, it is more stable. Nasdaq-listed BitDeer is also building its own AI data center in Singapore.
Looks like a beautiful business
However, only a few overseas mining companies can achieve this transformation. Secondly, the equipment used to mine Bitcoin is called ASIC, which is the abbreviation of application-specific integrated circuit. "Application-specific" means that it cannot be used for other tasks. Mining companies cannot "seamlessly connect" mining equipment to AI scenarios.
An AI Infra industry practitioner told Silicon Star, "For example, H100 is generally used for training models, while 4090 is used for mining."
In other words, if Bitcoin miners want to serve the AI industry, they must purchase brand new equipment. Moreover, the data center requirements for artificial intelligence and Bitcoin mining are different. Entering a new and highly complex industry is difficult enough, not to mention competing with well-funded technology giants such as Google, Amazon, and Microsoft.
Therefore, not all mining companies can replicate the high-value cooperation between Core Scientific and CoreWeave. Especially smaller miners, they actually don’t have much to offer the AI industry.
China has banned cryptocurrency mining, and there are no miners who have switched to AI. However, there are companies in other industries who want to get a piece of the AI wave. They either go directly into the market or set up computing power subsidiaries to start the "computing power leasing" business. According to statistics, there are more than 100 A-share listed companies with computing power leasing concepts, including "Lottery Printing King" Hongbo Co., Ltd., "MSG King" Lotus Holdings, etc. On the video platform, there are even contents like "I demolished a house in my hometown, bought 800 graphics cards, and partnered with my old junior high school classmates to do computing power leasing."
Ideally, the business model of computing power leasing only requires an initial investment in GPU server equipment, hosting the hardware in a professional intelligent computing center, and then leasing the computing power to end users. The hardware operation and maintenance and software services are all handled by the intelligent computing center.
But 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, and the cost of leasing high-end hardware for training AI is falling sharply. Featherless.Ai CEO Eugene Cheah wrote that the overseas H100 rental price was as high as $8 per hour, but now it has fallen to less than $2 per hour. This is mainly because some companies signed computing power leasing contracts early on, and in order to avoid wasting idle production capacity, they began to resell reserved computing resources, and most of the market chose open source models, resulting in a decrease in demand for new models.
The domestic computing power rental market is also experiencing a similar "computing power surplus" phenomenon, but "the rental market is unlikely to reduce prices because they were all purchased at high prices in the early stages," a practitioner in the intelligent computing industry told Silicon Valley Star.
"This is still faster."
There is a famous saying in the cryptocurrency circle: "computing is power". Computing power is power. This saying has now spread to the AI circle.
Behind computing power is energy. There is a close correlation between developed countries and high energy consumption, as can be seen if we compare the charts based on per capita electricity generation (kWh). In other words, obtaining energy surplus is a necessary condition for the advancement of civilization. After all, on top of basic survival levels such as agriculture, new levels such as manufacturing, transportation, public services, urbanization, and computing are superimposed, all of which require energy support.
In this dimension, the infrastructure originally built to serve cryptocurrencies is now providing solutions to the computing power needs of the AI era. This is undoubtedly an opportunity for the overseas digital currency mining industry, which has always wanted to get rid of speculation, to prove its value. As long as this craze continues, the leading manufacturers will benefit from the enthusiasm and liquidity brought by AI.
Every wave of technological innovation is always accompanied by a "gold rush". For speculators, what they are chasing is always the profit itself. It doesn't seem to matter whether the subject matter is digital currency, artificial intelligence, or tulips from three hundred years ago.
After the Bitcoin halving, some miners are faced with a dilemma: either continue mining and hoarding coins, hoping that the price of Bitcoin will rise; or transform into an AI data center, hoping to catch the express train of artificial intelligence and make a quick buck. Now that the price of the coin has hit a record high, some people are beginning to sigh: "It's still this fast." But there is another famous saying in the cryptocurrency circle: "It's harder to keep coins than to be widowed."
When people swing back and forth between the cryptocurrency circle and the AI circle, this repetitive process reminds people of what Keynes said: speculators do not care who is the most beautiful, they only care who will be chosen in the beauty pageant.
And this "beauty pageant" will continue endlessly.
