The fiercely competitive bitcoin mining industry is presenting miners with a clear choice: either transition to artificial intelligence (AI) computing or face financial losses. Galaxy Digital, founded by Michael Novogratz, is the latest company to make this strategic shift.
Galaxy Digital has recently entered into a non-binding agreement with a U.S.-based hyperscaler firm to convert its entire 800-megawatt mining capacity into hosting high-performance computers. This move comes at a time when the Bitcoin halving event has resulted in a reduction in mining rewards, intensifying competition and reducing profit margins for miners across the industry.
Currently, Galaxy Digital operates 200 megawatts out of its approved 800-megawatt capacity, with an additional 1.7 gigawatts of capacity being considered for potential permitting. By partnering with an AI computing firm, Galaxy Digital aims to diversify its revenue streams and adapt to the evolving landscape of the industry.
The rationale behind AI firms entering the bitcoin mining sector is straightforward: miners already have operational power capacity that can be quickly repurposed for high-performance computing, making it a mutually beneficial arrangement for both parties. This allows miners to explore new revenue streams in a challenging market, while AI firms can rapidly expand their operations to meet growing demand.
The trend of transitioning to high-performance computing gained momentum after Core Scientific, one of the largest mining companies, secured a significant deal with cloud-computing firm CoreWeave. This move resulted in a surge in Core Scientific’s stock price and prompted other mining firms such as Hut 8 and HIVE to allocate resources to AI computation.
Despite a 23% decrease in mining revenue compared to the previous quarter, Galaxy Digital managed to narrow its net loss and achieve a more than 30% growth in operating revenue in the third quarter. This positive performance led to a 7% increase in the company’s shares on the Toronto Stock Exchange. As the industry continues to evolve, companies like Galaxy Digital are adapting their strategies to stay competitive and maximize their revenue potential.