Goodbye Bitcoin, hello AI: Texas crypto companies transform to embrace the new wave

Author: CNBC; Compiler: Scott Liu, BitpushNews

Houston-based technology company Lancium and Denver-based Crusoe Energy Systems announced a multi-billion dollar project on Thursday to build a 200-megawatt data center near Abilene, Texas. Designed to meet the unique needs of AI companies, the center is the first phase of a larger 1.2-gigawatt construction project. When the data center is fully operational, it is expected to be one of the largest AI data centers in the world.

Interestingly, the location chosen to build the data center has some connection to the history of the Old West of the United States, adding a touch of nostalgia to this high-tech project. Abilene was once an important stop on the traversing "Cattle Trail", and now it will become a hub for cutting-edge AI technology.

Cryptocurrency mining companies have extensive data centers with access to fiber optic lines and large amounts of electricity across the United States. These data centers are exactly the type of facilities needed for compute-intensive artificial intelligence businesses, which means that cryptocurrency mining and AI facilities are highly synergistic, providing mining companies with a reasonable exit strategy.

Lancium plans to put the new facilities into operation in 2025, and will also use its patented technology for efficient energy management, balancing grid demand and supporting a wider energy transition. The new data center will meet the unique needs of AI applications such as medical research and aircraft design, demonstrating the diversity and potential of AI technology. “Data centers are rapidly evolving to support modern AI workloads, requiring new high-density rack space, direct-to-chip liquid cooling and unprecedented overall energy requirements,” said Crusoe’s Lochmiller.

Cryptocurrency Mining Companies Turn to Artificial Intelligence

Cryptocurrency mining companies have faced declining profitability in recent years, especially after the Bitcoin halving, when the business of generating new tokens became even less profitable. “Some operators are feeling the financial pressure from the recent block reward halving and are actively exploring exit strategies,” analysts at JPMorgan Chase wrote in a June report. The decline in profitability has pushed cryptocurrency mining companies to seek to diversify their businesses, and in order to make better use of existing facilities, Bitcoin mining companies are gradually turning to AI. Bit Digital and Hut 8, for example, have seen significant revenue from AI-related businesses. Lancium and Crusoe’s plans, which rely primarily on renewable energy, represent this broader industry shift. “Lancium’s original vision was to bring large-scale loads to locations with the best, abundant renewable energy to facilitate the energy transition,” said Lancium President Fenn. Initially, bitcoin mining was the best fit for that vision, but now Lancium is shifting its strategy toward AI. So far, the strategy seems to be working: The combined market capitalization of the 14 major U.S.-listed bitcoin miners hit a record high of $22.8 billion on June 15, an increase of $4.4 billion in just two weeks, according to a June 17 research note from JPMorgan. Bit Digital says AI now accounts for about 27% of its revenue. The company announced in June that it had reached a three-year agreement with a customer to supply Nvidia GPUs, which it expects to generate $92 million in revenue annually. Part of the funding came from liquidating some cryptocurrencies.

Miami-based Hut 8 announced that it had raised $150 million in debt from private equity firm Coatue to expand its artificial intelligence data centers. Hut 8 CEO Asher Genoot said the company reached multiple commercial agreements for the new AI business, including customer agreements with fixed infrastructure payments plus revenue sharing.

The adjustment is particularly beneficial for Core Scientific, which emerged from bankruptcy in January. On Tuesday, B. Riley upgraded its stock rating to buy from neutral and raised its price target from $0.50 to $13, citing the company's recent series of deals with Nvidia-backed startup CoreWeave. Last month, CoreWeave proposed to acquire Core Scientific for $1.02 billion, but was rejected. Core Scientific's market value is currently around $2 billion.

The power grid is "full of bullishness"

For years, Crusoe's work has been almost inseparable from the Bitcoin mining industry. Crusoe's technology helps oil companies turn waste gas into useful resources. Many cryptocurrency mining companies set up machines near these sites with the help of Crusoe to take advantage of this cheaper source of electricity. For example, starting in 2021, Exxon Mobil partnered with Crusoe to mine Bitcoin in North Dakota.

But Crusoe's Lochmiller told CNBC that AI infrastructure is actually part of the company's vision six years after its founding. “We are reimagining AI infrastructure from the ground up – from our energy solutions, to the design, engineering and construction of our specially designed AI data centers, to Crusoe Industries’ manufacturing capabilities for critical power data center infrastructure, and ultimately to our purpose-built AI compute clusters,” he said.

The Abilene facility, scheduled to open in 2025, also plans to run primarily on renewable energy. “Our power orchestration technology is positioned to ensure that hyperscale AI data center campuses are an asset to the grid, not a burden,” said Lancium President Fenn. Lancium’s patented technology allows it to gradually adjust energy buyers’ demands up or down in just five seconds to balance the inherently volatile grid.

“Lancium’s original vision was to bring large-scale loads to locations with the best, abundant renewable energy to facilitate the energy transition,” Fenn said. In 2018, the only suitable load was Bitcoin mining. One of the best features of Bitcoin is that it is completely location-independent. Miners only need power and an internet connection, unlike other industries that need to be close to end users.

However, Lancium's strategy has now shifted to artificial intelligence. "Traditional data centers have primarily optimized proximity to urban areas and users. Now, everything has changed, and AI data centers optimize large-scale energy supply, cost and greenness. Our vision, campus and technology are perfectly positioned for this larger and broader opportunity."

This shift is expected to have a significant impact on the cryptocurrency market. As more cryptocurrency mining companies turn to AI, it may reduce the computing power used for Bitcoin mining, thereby affecting the security of the network and transaction processing time. But at the same time, this move may reduce the energy consumption associated with Bitcoin mining and solve some environmental problems that plague the industry.

In short, this transformation of Lancium and Crusoe not only marks that Bitcoin miners are adapting to new market needs, but also demonstrates the huge potential and importance of AI technology in the future. With the rapid development of the AI ​​industry, similar cooperation and transformation will become more and more common.