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Cryptominers try to pivot GPU farms to AI after Ethereum merge and Crypto winter

The big picture: As much of the initial hype behind technology trends like cryptocurrency, web3, blockchain, NFTs, and the Metaverse faded, many people and organizations involved refocused their attention toward generative AI. Now, the pivot has impacted hardware originally used for blockchain, which could potentially lend its processing power to AI.

Two large cryptomining companies, Hut 8 and Hive Blockchain, have news/articles/2023-05-10/ether-crypto-miners-woo-artificial-intelligence-ai-with-gpu-chips-services?leadSource=uverify%20wall”>redirected their mining GPU infrastructure toward High-performance computing (HPC), which includes AI workloads. The move could recoup investments on GPUs the companies originally bought for cryptocurrency mining – a market that dramatically shifted last year.

Miners bought so many PC graphics cards during past crypto booms to mine Ethereum that it drove up GPU prices, angering consumers attempting to use them for playing games. Ethereum was especially well-suited to GPU-based mining until the cryptocurrency shifted its backend late last year. The accompanying crypto winter forced miners to return or resell used GPUs, although Bitcoin has recovered somewhat.

However, GPUs are also one of the main engines powering generative AI like ChatGPT (along with large numbers of contractors making $15 an hour). Nvidia believes AI is a much better use of its cards than crypto. The involvement of tech giants like Microsoft and Google further legitimizes AI as an alternate path for companies holding onto GPU-based crypto farms.

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Hut 8’s HPC business generated around $16.9 million last year, about 11 percent of its overall revenue – a gain attributed to shifting processing power to AI clients. Likewise, Hive wants to grow its HPC income from $1 million to $10 million in 2024 and $20 million by 2025. The revenue could go towards recovering the $66 million it paid Nvidia for its graphics cards in 2021.

However, most crypto operators won’t be able to use AI as a lifeline. Miner brokerage service Bitpro Consulting says that only five to 15 percent of mining GPUs can pivot to HPC.

Furthermore, AI applications require large amounts of hardware that need a large maintenance staff. Attempting the shift also puts prospective HPC companies in competition against Microsoft Azure and Amazon Web Services, which can already offer AI clients mature HPC infrastructure. Thus, likely only the biggest mining companies can make the transition. Ordinary GPU buyers probably won’t see a massive influx of AI startups pushing up prices anytime soon.

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