Several bitcoin miners have become increasingly vocal about their diversification strategies post-Bitcoin halving, with many venturing further into AI.
Hut 8 is among them, recently revealing it would look to build out its high-performance computing (HPC) vertical to support AI applications.
The company said Monday it had secured $150 million in funding through a convertible note from tech-focused investment firm Coatue Management. The investor deems the miner “well-positioned to accelerate new compute capacity” and advance the AI segment.
Indeed, Hut 8 CEO Asher Genoot told Blockworks he sees “hundreds of megawatts of opportunity” to build upon the miner’s existing footprint in the sector.
“We think that’s a significant size to capture some of the demand we’re seeing in the markets today, while giving us ample capacity and growth in the bitcoin mining business as well,” he explained.
According to Yahoo Finance data, Hut 8 stock rose more than 12% Tuesday and went up an additional 5% on Wednesday.
Core Scientific’s stock price has also jumped in recent weeks on the back of its 12-year hosting contract with CoreWeave. The Hut 8 rival said it was set to host the cloud provider’s NVIDIA GPUs for HPC operations — adding the deal presented a potential annual revenue opportunity of $290 million.
The Texas-based miner built upon that deal Tuesday, noting in a news release it would deliver an additional 70 MW to CoreWeave.
Despite seeking out new revenue opportunities after April’s halving event slashed per-block mining rewards from 6.25 BTC to 3.125 BTC, neither company is looking to ditch bitcoin mining anytime soon, or ever.
Read more: From BTC to HPC: Miners signal evolving focus after the halving
Hut 8 intends to grow the businesses “in parallel” — though it might take a contrarian approach on the BTC side, its CEO noted.
“We won’t necessarily grow when everyone else is growing,” Genoot added. “And we might grow when people aren’t growing, because that’s when we believe growth is cheapest and has the best return.”
Keep reading for more excerpts from Blockworks’ interview with Genoot.
Blockworks: What made this Coatue investment attractive to Hut 8?
Genoot: We’ve always been sensitive to raising capital due to believing that our stock was undervalued. So the way we structured the investment allowed us to create a convertible note where we could sell stock at a future greater valuation.
We believe Coatue is one of the most meaningful and respected investors in the technology space over the last decade. With them as an investor, it not only shows the market validation over our thesis and our expansion plans, but also brings in a rolodex of investors and counterparties they have within their ecosystem that they can bring into our opportunity set.
Blockworks: What are the company’s main headwinds right now? Tailwinds?
Genoot: Today, it’s no secret that we have an older fleet of bitcoin mining machines. I have communicated to the market that I have not wanted to purchase new machines because I believed newer-generation machines were coming out.
We have a strong balance sheet with over 9,100 bitcoin, we now have this new investment of $150 million and we have a diversified business. Our belief is, as we thoughtfully invest that capital, that we’ll be able to drive and build a really thoughtful and meaningful business.
So we’re OK to be long-term greedy and make the right investment decisions and be more patient in order to grow the business and position it for really great success.
Blockworks: We have seen some miners choosing to sell a portion or all of the BTC they mine. How does Hut 8 evaluate that?
Genoot: When we see an investment opportunity that’s extremely intriguing and high-growth velocity for the company, we look at where is the best way for us to bring the capital to that growth opportunity.
That might be equity, debt, financing. But if balance sheet capital is the cheapest, then that might be the approach that we take.
Blockworks: What do you think of Core Scientific’s deal with CoreWeave? How might a competitor’s actions impact Hut 8’s strategy?
Genoot: The market is growing quickly and we believe there are peers of ours that will grow and capture this opportunity alongside us…to build out this approach on power infrastructure.
It just continues to prove the thesis that this opportunity is there. The market is big enough; I don’t think it’s direct competition.
For us, this Coatue investment is important as well — because for folks outside the crypto, bitcoin mining and digital asset space, it gives a certain level of validation that they’ve done their diligence and believe Hut 8 has a platform to expand and provide for AI companies in the ecosystem.
Blockworks: Could the AI/HPC side of Hut 8’s business ever get bigger than the bitcoin mining business? If so, when?
Genoot: When you look at the total addressable market, in dollars, within AI/HPC, you have larger dollars and more traditional financing support for growth.
I think our objective has been, and will remain, to be one of the largest bitcoin miners in terms of footprint within the ecosystem.
Depending on the needs of our energy partners that we have, [it’s about] figuring out which is the best asset…in order to support the grid and be good partners.
I don’t think we need to choose to go all in on one or the other because you also have different pools of capital that will fund the growth.
It would be a shame to not grow bitcoin mining when we’re one of the largest operators of bitcoin mining facilities in the world today — and continuing to maintain that footprint while expanding and growing within a new business vertical.
