Hut 8 Secures $150 Million for AI Computing Infrastructure Expansion

Mining company Hut 8 has finalized an agreement with a fund managed by Coatue Management, which will invest $150 million in the firm through convertible bonds.

We are incredibly excited to announce a $150 million strategic investment from @coatuemgmt to partner in building a next generation AI infrastructure platform. This investment will accelerate growth in our data center portfolio and provides access to Coatue’s extensive network of… pic.twitter.com/BYvpHx50PS

— Hut 8 (@Hut8Corp) June 24, 2024

Hut 8 stated that it will leverage its capabilities in developing and operating energy infrastructure to meet the growing demand in the AI computing market.

“We are committed to supporting innovators advancing artificial intelligence and believe that computing power is crucial for significant growth across the entire ecosystem,” emphasized Coatue founder Philippe Laffont.

He believes Hut 8 is “well-positioned to capitalize” on emerging opportunities.

Hut 8’s CEO Asher Genoot highlighted Coatue’s extensive investment experience in the AI ecosystem.

“We believe this partnership will unlock significant opportunities and connect us to a broader space as we enter the next phase of growth,” he added.

The initial term of the bonds is five years, with an interest rate of 8% per annum, paid quarterly.

Coatue will have the option to convert the bonds into a stake in Hut 8 with certain restrictions. The initial price is set at $16.395 per common share, which includes approximately a 45% premium to the 10-day volume-weighted average price as of June 20.

Following the announcement of the partnership with Coatue, Hut 8’s shares on Nasdaq rose from $12.03 to $12.53 during the trading session on June 24.

Investors Eye Bitcoin Miners for AI Computing Hosting

In the past two weeks, following Core Scientific’s announcement of hosting GPUs from AI company CoreWeave, investor interest in bitcoin miners has surged. This is reported by The Block citing a JP Morgan report.

Analysts Reginald Smith and Charles Pearce highlighted that since the contract was signed, the combined market capitalization of 14 mining companies has increased by 22% or $4 billion. Experts attribute this to the growing recognition of the potential for using capacities for AI computing hosting.

They believe that the 12-year, $3.5 billion agreement between Core Scientific and CoreWeave “will confirm and accelerate miners’ diversification into high-performance computing (HPC) programs.”

Bank specialists suggested that bitcoin miners are well-positioned to benefit from HPC hosting, as they possess much of the necessary infrastructure. Access to cheap electricity is a key factor, they emphasized.

Building a data center from scratch can take up to five years, and accelerating access to electricity by three to four years would cost $105-140 million per MW, analysts added.

Iris Energy is considered to have the best opportunities to capitalize on the growing demand for HPC hosting among miners, experts believe. The company operates data centers powered entirely by renewable energy, has excess capacity, and is “not tied” to bitcoin mining.

Smith and Pearce also expressed surprise at Riot Platforms’ stance. Despite having significant energy capacities, the firm remains fully committed to cryptocurrency mining and shows no interest in diversifying through HPC.

As reported in May, bitcoin miners reported a decline in production following the April halving.