The AI industry is booming like never before, and it's creating a huge demand for data center space, GPU chips, and electricity to power these operations. This growth has led AI companies to find an unexpected solution: teaming up with crypto miners.

The recent AI explosion has put tremendous pressure on data center availability. According to a report by CBRE Group, 83% of the data center capacity currently under construction has already been pre-leased, mostly by AI firms and cloud-service providers. This has left many AI companies scrambling for alternatives, and that's where crypto-mining operations come in.

Crypto miners have the infrastructure that AI companies desperately need. They have massive data centers equipped with powerful GPUs and access to a significant energy supply. This makes them attractive partners for AI firms facing a critical shortage of resources.

A great example of this growing trend is Core Scientific, which recently struck a lucrative partnership with AI startup CoreWeave. This deal is expected to generate around $3.5 billion in revenue over 12 years. Shortly after this announcement, Bloomberg reported that CoreWeave offered to buy Core Scientific for about $1 billion. Core Scientific has identified roughly 500 megawatts of data center capacity that can be converted for AI applications, potentially hosting one of the largest GPU installations dedicated to AI worldwide. This capacity could power hundreds of thousands of homes each year, showcasing its incredible potential.

The market has responded positively to these developments, with companies like TeraWulf Inc. seeing a 22% jump in their shares. Investors are optimistic about the possibilities for synergy between the AI and crypto-mining sectors.

Expanding data centers to meet AI demands comes with its fair share of challenges, particularly when it comes to energy supply. Building substations to draw electricity from the power grid can take several years. Morgan Stanley estimates that if a developer can secure a power source two years ahead of their competitors, they might end up paying a premium of around 101% above current power prices. This assumes a six-year economic life for GPUs. Even with a ten-year economic lifespan, a 61% premium is still possible.

Miners are getting creative

Many crypto miners are now exploring the idea of converting their existing facilities to meet the needs of AI. The energy-intensive process of mining involves validating blockchain transactions using specialized computers. An update to Bitcoin's blockchain software in April, which halved mining rewards, has made the transition to data centers even more appealing. Morgan Stanley's analysis shows that a data center that can be quickly converted is much more valuable than a mining facility. The firm has identified over seven gigawatts of potential retrofit sites among the top 21 public crypto-mining companies, which currently contribute about a quarter of Bitcoin's mining power.

Some crypto miners, like Northern Data AG, Bit Digital Inc., Iris Energy, Hive Digital Technologies Ltd., and Hut 8 Corp., are directly purchasing specialized hardware to sell computing power to AI clients. These companies have made substantial investments in Nvidia chips, which are in high demand by data center giants like Google and Amazon. These firms, with their experience in running GPU-based mining operations alongside Bitcoin mining, are well-suited for high-performance computing. They often have established relationships with Nvidia or its wholesalers, having been significant GPU purchasers during previous crypto bull runs.

The AI boom has brought unprecedented growth to the data center business, a sector that used to be seen as a quiet corner of the tech industry. This transformation has caught the attention of major players from Silicon Valley to Wall Street. As AI continues to expand, experts believe the connection between AI companies