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Data center resources are becoming increasingly stretched amid a sudden and aggressive uptick in the adoption of generative AI applications. The production of GPUs that are largely responsible for supporting emergent LLMs is quite slow relative to the quickly scaling utilization of AI, which is pushing cloud computing providers to seek partnerships with cryptocurrency miners that hold an abundance of GPUs and ASICs that can be repurposed as high performance computing (HPC) assets. This could help to stabilize Bitcoin miners’ volatile primary revenue stream.

Miners have been diversifying into the dedicated data center business for at least two years now and have unique experience with power markets, which will now be a more critical consideration for data center operators running power-hungry AI chips. Just last week, cloud infrastructure provider CoreWeave inked an agreement with Bitcoin miner Core Scientific to provide the company with 200MW of hosting capacity over the next 12 years. That was quickly followed up by a billion-dollar bid for the whole firm.

Related ETF & Stocks: Valkyrie Bitcoin Miners ETF (WGMI), Hut 8 Corp. (HUT), Core Scientific, Inc. (CORZ)

The ongoing proliferation of generative artificial intelligence (AI) applications in enterprise has set off a global race for hardware assets that are capable of backing the heavy processing and data loads that chips will be subjected to when dealing with large language models (LLMs). The most in-demand product for supporting this type of algorithm has become the graphics processing unit (GPU), but the production of these complex semiconductors is quite limited relative to the rapidly increasing demands of a world that is suddenly in an aggressive AI adoption phase.

AI is largely accessed remotely through the cloud, allowing users to utilize various services and platforms remotely. The providers of these services, in turn, often rely on power-hungry data centers to back up the applications with concentrated loads of computing power. As MRP has noted in several recent intelligence briefings, data centers are already encumbered with unprecedented processing needs that are spurring a boom in new construction of these facilities over the next several years. But those facilities will take time to build while the utilization of AI is spiking now, in real time.

Dedicated data centers are not the only facilities that maintain vast shelves stocked full of GPUs, however, as the world’s increasingly vast number of crypto-mining facilities – a sort of data center themselves – also host these semiconductors. Crypto-mining primarily leverages rigs of GPUs, as well as application-specific integrated circuits (ASICs), in a process known as hashing that allows for “solving” blocks of transactions, which can then be added to a canonical ledger of previous blocks (hence, blockchain). A block is loaded with transactions that are essentially settled by a miner who is then rewarded with newly-minted cryptocurrency and transaction fees associated with that block.

Bitcoin is the primary asset miners are focused on, as it is the largest cryptocurrency by market capitalization at $1.36 trillion. MRP has previously published a trove of Intelligence Briefings that explain and analyze the intricacies of Bitcoin mining in depth, but what is important to understand in the context of this report is that the same machines which undertake this process can also be used as high-powered computing (HPC) in the cloud.

Crypto-miners’ foray into the realm of more traditional data centers processes is not a particularly new development, but agreements between these enterprises and cloud computing providers are becoming more common and…

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