AI: AI race for US energy sector collides with bitcoin mining

American tech companies are chasing energy assets held by bitcoin miners as they compete to secure an ever-shrinking supply of electricity for its rapidly expanding cloud computing and artificial intelligence data centers. data centers are driving the fastest growth in U.S. energy demand since the turn of the millennium, outpacing grid expansions and leaving giant tech companies like Amazon and Microsoft scrambling to source vast amounts of electricity.

The electricity crisis is shaking up the energy-intensive cryptocurrency mining industry. Some miners are making huge profits by renting or selling their power-connected infrastructure and sites to tech companies, while others are losing access to the electricity needed to stay in business. AI “The battle for dominance is one being fought by the world’s largest and best-capitalized companies, and they care as if their lives depend on it,” said Greg Beard, chief executive of Stronghold Digital Mining, a publicly traded company. bitcoin mining company. “Do they care what they pay for energy? Probably not.”

Data centers could use up to 9% of total electricity generated in the United States by the end of the decade, more than double their current consumption, as technology companies pour funds into expanding their computing centers, the Electric Power Research Institute said in May.

According to the International Energy Agency, data centers currently account for between 1% and 1.3% of global electricity consumption, compared to around 0.4% for cryptocurrency mining. That disparity is expected to increase.

Analysts expect 20% of bitcoin miners’ power capacity to be converted to AI by the end of 2027. Over the past year, bitcoin miners and AI data center owners have increasingly competed for the same power assets and contracts, executives at more than half a dozen publicly traded U.S. cryptocurrency mining companies told Reuters.

Marathon Digital Holdings, the world’s largest publicly traded bitcoin mining company, was among those interested in a nuclear-powered data center owned by Talen Energy in Pennsylvania, two sources familiar with the situation said. “We’re always willing to talk to anyone who’s looking to sell a data center,” Marathon said, without confirming specific interest in the site. Amazon, with a market capitalization more than 350 times the size of Marathon, bought the center in a deal announced in March and secured enough electricity to power nearly every home in New Mexico.

Growing interest Many large miners that own land and power connections are shifting their strategies from exclusively mining cryptocurrencies to marketing their energy properties and services to artificial intelligence and cloud computing companies.

“We’ve had a lot of interest from everyone from Amazon to Google,” said Kerri Langlais, chief strategy officer at bitcoin mining company TeraWulf, which has a site in upstate New York that’s capable of producing up to 770 megawatts (MW). The frenzy of tech prospects for miners began in June, when newly bankrupt cryptocurrency mining company Core Scientific became the first to announce a major deal to lease its power-connected facilities to Nvidia-backed CoreWeave in deals estimated at more than $6.7 billion over 12 years. Since then, several mining companies have said they would lease or act as subcontractors to develop AI data centers. Today, new data centers, typically around 20 MW, are being built as large as 1,000 MW. But wait times to connect new power supplies in the United States can take several years.

For cryptocurrency miners Companies with large energy assets that repurpose their operations for artificial intelligence and cloud computing could make their facilities up to five times more valuable, according to a Morgan Stanley study. Buying or leasing space at a mining company with at least 100 MW of capacity can reduce lead times for data center startup by about 3.5 years, saving tech companies billions, Morgan Stanley said.

Difficult transition

Still, the transfer of power supply and infrastructure to tech companies by cryptocurrency miners will not be easy for most, if possible at all, several miners said.

“Most bitcoin miners who say they’re going to do AI don’t really know what they’re getting into,” CleanSpark CEO Zach Bradford said, adding that his company will continue to pursue cryptocurrency mining as its core business.

About 90% of the country’s bitcoin mines can be built in six to 12 months, compared with the three years it would take for a more sophisticated data center, Bradford said.

Those mines, he added, would have to be rebuilt to incorporate specialized cooling structures and other infrastructure that can be used for AI or cloud computing.

High costs of building AI data centers would be a barrier for many cryptocurrency miners, who were largely barred from accessing capital after Bitcoin’s price crash in 2022, said Sergii Gerasymovych, CEO of EZ Blockchain, which supplies equipment and services for cryptocurrency mining.

This year, EZ Blockchain had a 10 MW project underway with a South Carolina utility until the company signed a 100 MW contract with a hyperscale AI company.

Hyperscalers include the world’s largest technology companies that operate massive global networks of data centers and cloud infrastructure.

While the financial details of the AI ​​data center deal were unclear, Gerasymovych said the company he was competing against had billions of dollars of capital to play with.

“For them, it’s all about speed to market and they’re just throwing money away,” he said. “What do they have to compete with?”