Original Article Author: Colin Harper, Luxor Technologies Content Manager

Original Article Translation: Luffy, Foresight News

Original Article Source: Forbes

The Bitcoin industry, especially mining, is no stranger to hype. And now, a new technology has emerged: Artificial Intelligence.

ChatGPT and other large language model programs (commonly referred to as AI) have made waves in the workplace and online world this year. So it's natural to find references to AI in cryptocurrency news.

For example, some Bitcoin miners publicly state that they are seizing opportunities in the AI sector, trying to make outdated hardware useful. However, this doesn't mean that every company is performing the same functions as AI data centers or achieving the same scale. In fact, the tasks performed by this outdated hardware are quite different from those required by typical AI services, and some miners are just capitalizing on the trend without delivering actual AI services.

Can Bitcoin miners provide AI services? It's complicated

Over the past few months, companies like HIVE, Hut 8, and other Bitcoin mining firms have announced new High-Performance Computing (HPC)/AI strategies. Most of them have hardware that became obsolete when Ethereum transitioned to Proof-of-Stake (PoS) consensus mechanism, ending the era of Ethereum mining. Some miners claim that they can lease their computing power for high-performance computing (although Hut 8 has been doing this since 2022).

High-performance computing is a general term for various data center tasks. However, when miners talk about HPC, they specifically refer to cloud computing or graphics rendering, among others. Hut 8 earned $4.5 million from such services in the first quarter and $4.3 million in the second quarter, while HIVE's pilot project earned $200,000 in the first quarter, although the latter did not mention any HPC revenue in the second quarter in their SEC filing. Hut 8 has a contract with the Interior Health agency in British Columbia, providing high-performance computing services until 2028. The company acquired a 6-megawatt facility that provides these services when it purchased TeraGo's Toronto data center business in 2022.

These are different types of computing from training AI models or providing support for ChatGPT. Miners do not have suitable computing equipment for such work, nor do they have appropriate power and network infrastructure (AI computing requires at least 1TB of network bandwidth per second, which is far beyond the capabilities of industrial-scale mining facilities whose bandwidth typically reaches only 1GB per second).

The cost of a true artificial intelligence data center may be 10 to 20 times that of a Bitcoin mining farm per megawatt (according to ERCOT, a megawatt can power approximately 200 households in Texas). In addition, the power cost of such facilities will be twice that of current miners, potentially reaching 15 cents per kilowatt-hour. Bitcoin miners in the US typically pay 5-8 cents for electricity.

The cost of running HPC facilities is much higher than that of Bitcoin miners

Riot Platforms estimates that the cost of its upcoming Bitcoin mining farm near Kosse, Texas, will be $833,000 per megawatt of power capacity, with an initial construction capacity of 400 megawatts.

In contrast, the average cost of a North American HPC data center is $9.5 million per megawatt (calculated based on Turner & Townsend's 2022 Data Center Cost Index).

The high cost stems from the complexity of these data centers. They require higher quality power infrastructure and network equipment, not to mention they need more space, better cooling, and more powerful backup generators to ensure 99.99% uptime during power outages. In short, these miners don't have the funds or market capabilities to build AI systems, let alone the ability to build a traditional data center.

This cost applies only to traditional high-performance data centers and may not apply to data centers with drivetrain capabilities like OpenAI's ChatGPT and Microsoft's Bard.

Miners might venture into high-performance computing but not into artificial intelligence

Many Bitcoin mining companies emerged from sudden shifts in business lines, but at this stage of development, these companies should be cautious in trying to contain the hype around technologies like HPC/AI.

The current largest two publicly traded Bitcoin miners, Riot Platforms and Marathon Digital, announced their Bitcoin mining operations in 2017, but these companies were already listed before they got involved in cryptocurrencies. Marathon Digital's predecessor was Marathon Patent Co., which profited from buying and selling various technology patents, while Riot was a pharmaceutical company.

Both companies have now become among the world's largest Bitcoin miners, so this transition has paid off for them.

However, for a major Bitcoin miner, transforming its mining farm into an artificial intelligence data center would be extremely difficult and expensive. It is also worth noting that in the traditional data center market, miners would be competing with Google, Amazon, and Microsoft, some of the world's most powerful tech companies.

Applied Digital is an exception: it is a data center company that also hosts Bitcoin mining equipment for clients. This distinction is important because traditional data center operators find it easier to deploy Bitcoin mining equipment on-site than for miners to build a data center from scratch. The AI hype in 2023 pushed Applied Digital's stock price up to $10.24, but at the time of writing this article, it has fallen significantly to $5.68. As shown in the figure below, both Applied Digital and mining stocks are currently in a hot state, so we advise investors considering these stocks to proceed with caution.

This year, Bitcoin mining stocks have soared along with related assets, but many hope that artificial intelligence can regain its bullish momentum.

Summary

When the hype subsides, the market will tell us which companies are in a favorable position to seize the wave of artificial intelligence.

For miners, they can offer graphic rendering services, but they do not use their mining hardware for ChatGPT. So when you see artificial intelligence in a press release, don't be misled—it may not be what you imagine.