Cryptocurrency was as soon as the buzzy sector driving a surge of information middle improvement for mining amenities, however as that growth has fizzled, most of the firms and undertaking websites are pivoting to assist the brand new sizzling subject: synthetic intelligence.
A Bitcoin mine is only a information middle, however cryptocurrency mining developed right into a separate asset class distinct from the broader information middle sector that serves cloud suppliers and company tenants. The 2 industries function with essentially completely different enterprise fashions, little overlap when it comes to clients and vastly completely different siting and design issues for brand new improvement.
However this dynamic is altering. A wave of funding in synthetic intelligence by the world’s largest tech firms is driving struggling Bitcoin miners to pivot towards conventional information middle tenants, shifting their enterprise fashions to internet hosting AI computing. On the similar time, surging AI demand has led to vitality shortages which can be altering the event math for information middle suppliers and tenants, main them to places that had been as soon as solely the territory of crypto miners.
“It used to be you’d look down your nose at these Bitcoin miners who were building in these lower-tier markets,” stated Sarah Keller, Uber’s head of worldwide technical sourcing and provide chain, talking at Bisnow’s DICE Northwest occasion final month. “Now, it’s an important part of the strategy.”
It has been a tough couple of years for cryptocurrency miners.
The U.S. skilled a crypto mining constructing growth between 2020 and mid-2022, a interval that noticed miners snap up hundreds of megawatts of vitality rights and launch large improvement initiatives slated to dwarf even the most important cloud information facilities in use at the moment. However this wave of bitcoin mining build-out got here to a screeching halt in 2022 when the worth of bitcoin and different digital currencies plummeted greater than 64%, kicking off a wave of bankruptcies and consolidation throughout the trade.
Though cryptocurrency costs bounced again to new file highs this spring, most of the remaining companies are nonetheless struggling to remain afloat within the wake of an April adjustment to the bitcoin blockchain, an occasion referred to as “The Halving,” that lower miners’ revenues in half right away. A big variety of miners are anticipated to close down their machines within the coming months.
But the darkest days of the “crypto winter” coincided with the emergence of a brand new phenomenon that some crypto miners rapidly noticed as a lifeline: generative AI.
The sudden success of OpenAI’s ChatGPT in late 2022 kicked off a Large Tech AI arms race, with firms like Microsoft, Google and Meta scrambling to construct out the info facilities wanted to develop generative AI and combine it throughout their numerous services. AI continues to drive unprecedented information middle progress because the world’s largest firms wager billions on an AI-focused future.
However the computing behind generative AI, notably the programs for coaching the fashions underpinning applied sciences like ChatGPT, may be very completely different from the IT gear most information facilities had been designed to assist. In lots of respects, the infrastructure wants for AI computing extra carefully resemble crypto mining.
Like crypto mining, AI coaching makes use of high-performance, power-intensive GPU processors that use much more vitality and produce much more warmth than conventional information middle servers. Like crypto mining, AI coaching is just not “mission critical” that means it would not require the a number of layers of redundancy to stop energy outages or different main failures which can be integral to the design of mainstream information facilities.
Additionally like cryptocurrency mining, AI coaching would not want the quick information switch speeds, referred to as latency, which have historically required information facilities to be positioned in areas with sturdy optical fiber networks and near different information facilities and main inhabitants hubs.
As mining revenues languish, a rising variety of crypto computing companies are pivoting towards the AI information middle gold rush.
CoreWeave, a New Jersey-based agency that initially centered on crypto and blockchain computing, has efficiently remodeled itself into an AI-focused cloud service supplier, providing entry to GPUs for AI functions. In June 2023, the agency signed a deal to offer AI computing for Microsoft in a deal that reportedly may very well be price billions.
CoreScientific, as soon as one of many world’s largest bitcoin miners till its chapter following the 2022 crypto crash, is leasing 16 megawatts to CoreWeave and plans to transform extra of its infrastructure to energy high-performance computing for AI.
Moreover, Iris Power has indicated it’s shifting some capability on the firm’s 5 information facilities in Texas and British Columbia to host AI coaching, whereas high-profile mining companies like Hut 8, Hive and Terawulf all both have ongoing AI operations or plans for AI progress.
Nonetheless, specialists warn that this shift from crypto to AI information facilities is simpler stated than achieved.
The true property issues for the 2 industries are related, however there are additionally key variations. Many bitcoin mining amenities will want vital upgrades and design modifications to draw AI tenants — capital initiatives most miners haven’t any expertise executing.
AI internet hosting can be a totally completely different enterprise mannequin than cryptocurrency mining, and a few specialists fear that miners will likely be at a big drawback to these with years of expertise growing the skillsets wanted for customer-facing colocation.
Barkers Level Capital Advisors Managing Companion Barry Kupferberg in contrast this pivot to the proprietor of a mid-level house constructing in a high-end neighborhood making an attempt to transform the property right into a 4 Seasons.
“You need access to capital, and you need the expertise to execute, and it’s not clear that these crypto mining companies have either one of those two parts,” Kupferberg stated. “Some crypto mining firms will be able to pivot, but some will struggle.”
Whereas former crypto miners are shifting towards mainstream information facilities, information middle builders and the trade’s largest tenants are beginning to suppose extra like crypto miners in the case of the place they construct information facilities.
As file information middle improvement drives more and more dire energy constraints within the trade’s main markets like Northern Virginia, Silicon Valley and Atlanta, builders are actually keen to construct wherever they’ll discover tons of of megawatts of electrical energy, even when these websites lack the community connectivity or proximity to inhabitants facilities that might have made them solely the realm of cryptocurrency miners simply two years in the past.
In March, Amazon Net Companies introduced plans for a 15-building information middle campus at a nuclear energy plant in distant northeast Pennsylvania, a undertaking straight adjoining to a TeraWulf crypto mining facility. Over the previous two years, AWS has launched a slew of large-scale information middle initiatives in rural places like Madison County, Mississippi, and Louisa County, Virginia.
Google and Microsoft even have main initiatives underway at places far off the normal information middle map in locations like Mount Nice, Wisconsin, and Fort Wayne, India. And social media big Meta introduced this month that it’s going to develop an AI information middle in Wyoming.
More and more, hyperscale builders’ quest for energy is main them to undeveloped websites owned by crypto miners themselves, information middle executives say.
The crypto gold rush that kicked off in 2020 noticed a flood of miners and speculators snap up hundreds of acres of land and safe grid interconnection agreements with utilities for hundreds of megawatts of electrical energy. However a lot of that land and capability has but to be developed.
Now, information middle builders have their eyes on these websites. With wait occasions for brand new grid connections from utilities now stretching up to as a lot as seven years, hyperscalers determined for brand new capability are keen to pay a big markup to accumulate websites the place they’ll entry energy comparatively rapidly.
“There are miners that either had development projects in their pipeline or additional capacity at their existing interconnects who are now looking at the premium that the data center and hyperscale developers will pay in order to get projects online to hit their 20 gigawatt or 30-gigawatt development targets,” stated Austin Storms, co-head of mining at crypto-oriented monetary companies agency Galaxy.
“They’re looking at that and thinking it might be prudent to sell some capacity or sell a development project while Bitcoin mining economics are pretty bad post-halving.”
Whereas third-party developer Tract just lately is planning on a 2,200-acre Nevada campus at a web site acquired from crypto agency Blockchain LLC, few of those transactions have emerged up to now. However Storms believes that plenty of hyperscale acquisitions of crypto mining belongings will likely be executed earlier than the tip of the yr, together with the sale of current mining amenities – a pattern that would speed up if financial situations drive additional consolidation within the crypto mining trade.
“The hyperscalers are hanging around the hoop on some of these mining facilities that have bulk power,” Storms stated. “It’s starting to heat up over the last couple months. We haven’t seen a lot of those transactions execute, but I think there’s a significant number in the pipeline that we’ll probably see over the next couple of months.”