Bye-bye Bitcoin, Hello AI: Texas Miners Leave Crypto for Next New Wave

Just off of Interstate 20, in the heart of West Texas, is a town of 125,000 people called Abilene. Once a stopping point along a cross-country cattle trail in the days of the American Old West, the small outpost is now getting into the burgeoning artificial intelligence business. Lancium a Houston based tech company and Denver-based Crusoe Energy Systems announced on Thursday morning a multibillion-dollar deal to build a 200-megawatt data center just outside Abilene. It is designed to meet the unique needs of AI companies such as enabling advanced cloud computing for applications like medical research and aircraft design. It is the first phase of a larger 1.2-gigawatt build-out.

Lancium President Ali Fenn told CNBC that at full capacity this will be one of the largest AI data center campuses in the world and it will leave bitcoin mining behind. Chase Lochmiller, Crusoe’s co-founder and CEO said “Data centers are rapidly evolving to support modern AI workloads, requiring new levels of high-density rack space, direct-to-chip liquid cooling and unprecedented overall energy demands.” There are a lot of synergies between the bitcoin mining and AI infrastructure businesses.

Mining firms have expansive data centers, with access to fiber lines and large amounts of power across the U.S. They’re exactly the types of facilities needed for compute-intensive AI operations, which means their sites and technology are in high demand.

Meanwhile, miners need to diversify their portfolio, following the bitcoin halving in April, an event that happens about once every four years, the business of generating new tokens has become much less profitable. With the burgeoning AI industry in need of capacity and bitcoin miners in search of new ways to generate returns on their hefty investments, mergers, financing and partnerships are rapidly coming together.

According to a June 17 research note from JP Morgan, the combined market capitalization of the 14 major U.S.-listed bitcoin miners tracked by JPMorgan hit a record high of $22.8 billion on June 15 surging $4.4 billion in just two weeks. Bit Digital, a bitcoin miner that now derives an estimated 27% of its revenue from AI, said in June that it had entered into an agreement with a customer to supply Nvidia GPUs over three years at a data center in Iceland, in a deal that is expected to generate $92 million in annual revenue. It’s paying for the general processing units, in part, by liquidating some of its crypto holdings. Hut 8 company based in Miami said it raised $150 million in debt from private equity firm Coatue to help it build out its data center portfolio for AI.