Many Bitcoin miners have been increasingly vocal about their diversification strategies since the Bitcoin halving, with many moving into AI.
Hut 8 is one of them, recently revealing that it will look to verticalize its high-performance computing (HPC) to support AI applications.
The company said on Monday that it has secured $150 million in funding through a convertible note from tech-focused investment firm Kotiv Management. The investor calls the miner “well-positioned to accelerate new compute capacity” and push the AI segment forward.
In fact, Hit8 CEO Asher Gennot told Blockworks that he sees “hundreds of megawatts of opportunity” to build on the miners' current footprint in the sector.
“We think this is a significant size of the demand we're seeing in the markets today, while also giving us a lot of potential and growth in the bitcoin mining business,” he explained.
Hut 8 stock rose more than 12% on Tuesday and gained an additional 5% on Wednesday, according to data from Yahoo Finance.
Core Scientific's stock price has also risen in recent weeks on the back of its 12-year hosting agreement with CoreWeave. Hit 8's rival said it was willing to host the cloud provider's NVIDIA GPUs for HPC operations — a deal that offered a potential annual revenue opportunity of $290 million.
The Texas-based miner built on the deal on Tuesday, noting in a news release that it will provide an additional 70 megawatts to Coreview.
Despite finding new revenue opportunities after the April halving event, which reduced mining rewards from 6.25 BTC to 3.125 BTC per block, no company plans to stop mining Bitcoin sooner or later. Not trying.
Read more: BTC to HPC: Miners signal focus after halving
Hit 8 plans to grow the business “in parallel” — though it may take a hawkish approach to BTC, its CEO noted.
“We're not necessarily going to grow when everyone else is growing,” Jeannot added. “And we can grow when people aren't growing, because that's when we think growth is cheapest and has the best returns.”
Read on for more excerpts from Blockworks' interview with Jeannott.
Block Works: What made this Coatue investment attractive to Hit 8?
Jeannot: We have always been sensitive to raising capital because of the belief that our stock was undervalued. So the way we structured the investment allowed us to create a convertible note where we could sell the stock at a higher price in the future.
We believe Coatue is one of the most meaningful and respected investors in the technology sector over the past decade. With them as an investor, it not only shows market validation on our thesis and our expansion plans, but also brings a Rolodex of investors and counterparts that they have in their ecosystem that they Can bring in our set of opportunities.
Block Works: What are the main problems of the company at the moment? Tailwinds?
Jeannot: Today, it is no secret that we have an aging fleet of Bitcoin mining machines. I have told the market that I don't want to buy new machines because I believe new generation machines are coming.
We have a strong balance sheet with over 9,100 bitcoins, we now have $150 million in new investments and we have a diversified business. We believe, as we invest this capital thoughtfully, that we will be able to build and operate a truly thoughtful and meaningful business.
So we're fine with being greedy long-term and being more patient in making the right investment decisions and growing the business and positioning it for really big success.
Block Works: We have seen some miners choose to sell a portion or all of their BTC. How does Hit 8 measure up?
Jeannot: When we see an investment opportunity that is very exciting and high-growth for the company, we look at where the best way for us to channel capital is to that growth opportunity.
It can be equity, debt, financing. But if off-balance sheet capital is the cheapest, that might be the approach we take.
Block Works: What do you think about Core Scientific's deal with CoreWeave? How might a competitor's actions affect Hut 8's strategy?
Jeannot: The market is evolving rapidly and we believe we have partners who will grow with us and seize this opportunity… to develop this approach to power infrastructure.
It just proves the thesis that the opportunity exists. The market is quite large; I don't think it's a direct competition.
For us, this Coatue investment is also important – because for people outside of crypto, bitcoin mining and digital assets, it provides a certain level of validation that they've done their due diligence and believe that Hut 8 has a platform to expand and deliver. For AI companies in the ecosystem.
Block Works: Could the AI/HPC side of Hit8's business be bigger than the Bitcoin mining business? If so, when?
Jeannot: When you look at the total addressable market, in dollars, within AI/HPC, you have larger dollars and more traditional financing support for development.
I think our goal has been, and will continue to be, one of the largest Bitcoin miners in terms of footprint within the ecosystem.
Depending on the needs of our energy partners we have, [it’s about] Figuring out which is the best asset…to support the grid and be a good partner.
I don't think we need to choose one or the other because you also have different pools of capital that will fund growth.
It would be a shame not to expand Bitcoin mining when we are one of the largest operators of Bitcoin mining facilities in the world today – and continue to maintain that footprint by expanding and growing within new business verticals. Will keep.
This interview has been edited for clarity and brevity.
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