Crypto's Second Act: Powering the AI Revolution
The Untapped Potential of Bitcoin Mining Sites
Today, I want to shine a spotlight on a fascinating development that has the potential to reshape the data center industry: the conversion of crypto mining facilities into AI-focused data centers.
A recent transaction between Core Scientific and CoreWeave highlights the potentially high value of repurposing crypto mining sites for data center use.
This deal, which involves Core Scientific delivering 200 megawatts of infrastructure to CoreWeave under a 12-year contract with an average annual revenue of $290 million, showcases the untapped potential of these facilities.
The Power Advantage
There are several compelling reasons why this conversion trend could gain traction. Firstly, crypto mining facilities often have substantial access to power, making them attractive candidates for data center developers facing increasing "time to power" challenges.
For example, Core Scientific's crypto sites have an average power cost of $44/MWh, much lower than Northern Virginia's average commercial power costs of ~$75/MWh.
Secondly, the large volumes of power consumed by crypto mining sites, often in the range of 100 megawatts or more, offer a distinct advantage over retrofitting older, power-constrained data centers.
Additionally, the typically low cost of power at crypto mining sites and the potential for significant economic value arbitrage make this conversion play even more enticing.
Quantifying the Opportunity
Analysts have provided a wealth of data and insights to support this thesis. They quantify the risk of "idle chips" due to delays in connecting new data centers to the grid, with projections showing that the sum of planned data center projects in major US markets totals ~12.2 GW, less than the base case US data center 2025-26 power demand growth of ~15.1 GW.
The value for data center developers to bring their facilities online more rapidly is substantial, with a two-year time advantage potentially worth a ~$100/MWh power price premium, assuming a six-year economic life of the GPUs.
In terms of value per watt of capacity, a 2-year advantage could be worth over $5/W to a data center developer, while a 5-year advantage could exceed $12/W.
A Greener Future
From a sustainability perspective, the conversion of crypto mining facilities to data centers could also lead to further decarbonization.
As the ultimate customers of these data centers, such as hyperscalers like Google, Amazon, and Microsoft, are likely to demand 100% renewable power, this transition may result in a more environmentally friendly outcome compared to constructing new data centers that might rely on natural gas-fired generation to expedite grid connection.
With the global crypto (bitcoin) mining power consumption estimated at ~19.6 GW of capacity, or ~171.5 TWh of annual power consumption, the potential impact of this transition could be significant.
Implications for Investors
The implications for tech investors are significant. Crypto companies with attractive mining sites, such as Core Scientific, could unlock substantial value by partnering with or selling to data center developers.
In turn, data center developers like CoreWeave could accelerate their growth rates and tap into a new source of readily available power capacity.
To put this into perspective, a 100 MW data center would cost ~$3.2 billion based on current estimates, and global data center capacity growth is projected to reach ~12,300 MW in 2024 and ~15,700 MW in 2025 in the base case scenario.
Converting crypto sites to data centers could unlock very rapid spending growth and avoid the risk of "idle chips."
As always, investors should conduct their own due diligence and carefully assess the specific opportunities and risks associated with any investment. However, the crypto-to-data center conversion trend is undoubtedly one to watch closely. It has the potential to reshape the data center landscape, unlock significant value, and support the ongoing growth of AI and high-performance computing applications.
Stay tuned for more insights and analysis on this evolving space. As the tech industry continues to innovate and adapt, we at ABCD Tech Investing remain committed to keeping you informed about the most promising opportunities on the horizon.
Disclaimer: This article is for informational purposes only and does not constitute financial advice or a recommendation to buy, sell, or hold any securities mentioned. The content is based on the author's analysis of MongoDB's Q1 FY2025 earnings release and should not be relied upon as a substitute for thorough research.
Investors should conduct their own due diligence and consider their individual financial situation, risk tolerance, and investment objectives before making any investment decisions. The author and the publication do not accept any responsibility for any loss or damage arising from the use of this information.
Past performance does not guarantee future results, and investing in securities carries inherent risks, including the potential loss of principal.