The brutally competitive bitcoin (BTC) mining industry is offering a clear choice to miners: pivot to artificial intelligence (AI) computing or suffer losses. Michael Novogratz’s Galaxy Digital (GLXY.TO) is the latest to join the exit queue, signing a non-binding term sheet to potentially convert its 800 megawatt (MW) power capacity to high-performance computing (HPC).
The rationale behind AI firms coming to bitcoin mining is simple: Miners have operation-ready power capacity that is faster to deploy than building a data center from scratch. It’s a win-win for both parties as miners get to diversify their revenue from a highly competitive sector and AI firms get to ramp up their operations fast to feed the ever-growing demand.
Galaxy’s Helios mining facility in West Texas has 800MW of approved power capacity, 200MW of which is currently in operation. The company also has 1.7 gigawatts (GW) of capacity under study for potential permit at the site. This move, which is subject to due diligence and approvals, comes as Bitcoin’s fourth halving event lowered the mining rewards by half, making the industry more competitive and squeezing profit margins for miners.
The HPC trend started after one of the largest miners, Core Scientific (CORZ), signed a mammoth deal with cloud-computing firm CoreWeave. That saw its stock price surge, leading investor pressure on rivals to follow suit. Unsurprisingly, other firms including Hut 8 and HIVE are now dedicating significant resources to AI computation instead of purely mining for bitcoin.
Galaxy’s mining revenue fell by 23% from the previous quarter, even as total hashrate, or mining power, increased by 11% due to the halving, higher mining difficulty, and seasonal operation curtailments. Despite Galaxy’s mining woes, the firm narrowed its third-quarter net loss, and its operating revenue grew more than 30% from the previous quarter.
The shares jumped more than 7% in Toronto on Thursday, while bitcoin and the broader market index, CoinDesk 20, were positive for the day. This strategic shift by Galaxy Digital highlights the growing trend of miners diversifying their operations to combat the increasingly competitive and challenging bitcoin mining landscape.