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.

Houston-based tech company Lancium and Denver-based Crusoe Energy Systems announced on Thursday morning a multibillion dollar deal to build a 200-megawatt data center just outside Abilene that 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 buildout.

Lancium President Ali Fenn told CNBC that at full capacity, this will be one of the largest AI data center campuses in the world, in the latest example that the race to power AI — and leave bitcoin mining behind — is accelerating.

“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,” said Chase Lochmiller, Crusoe’s co-founder and CEO.

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. 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. JPMorgan Chase analysts wrote in a report in June that “some operators are feeling the financial pinch from the recent block reward halving, which cut industry revenues in half, and are actively exploring exit strategies.”

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, financings and partnerships are rapidly coming together.