The AI-crypto power struggle
All those fancy artificial intelligence systems need a lot of data centers to run, and those data centers need a lot of energy.
One estimate from the Electric Power Research Institute suggests that U.S. data center electricity consumption will more than double by 2030, making up about 9% of all energy use.
But the AI sector is coming up against the energy-hungry tech innovation of yesteryear — crypto mining.
Marketplace’s Meghan McCarty Carino spoke with Reuters reporter Laila Kearney about the scramble to power up in both industries. The following is an edited transcript of their conversation.
Laila Kearney: In a lot of the conversations I was having with power companies and with crypto miners, it was like, is this more of a competition, or is this more of an opportunity? And most people will say that it’s both. There’s not infinite amounts of power to go around, of course, so I am hearing from some crypto miners who were talking to utilities trying to get power contracts, thought they had some type of agreement in the bag and then realized that the contract had instead gone to an AI data center developer. If money, essentially, is the main factor in being able to get some of these data centers and contracts and land that are connected to power, then there’s not really a competition in that sense because there’s all this capital behind the technology industry versus cryptocurrency mining.
Meghan McCarty Carino: So is that where the opportunity comes in, because you write about some crypto miners who are just pivoting their business to sell power to AI data centers, right?
Kearney: Pretty much every big crypto miner is considering what they have to potentially market to AI data centers, but to build a cryptocurrency mining operation, it’s a couple of hundred thousand dollars per megawatt of capacity. To build a modern data center for AI, it’s about $7 to $8 million per megawatt of capacity, and that’s because these AI data centers are just much more sound, much more sophisticated. They require extremely involved and expensive cooling systems, so you can’t necessarily just roll out a bunch of [graphics processing units] for generative AI, you’re going to have to do retrofitting regardless. It’s an opportunity, and it’s being talked about a lot, especially because there is this giant deal between Core Scientific, the bitcoin miner, and CoreWeave. But that can’t necessarily be replicated even by a lot of the big bitcoin miners.
McCarty Carino: Are there any crypto miners out there that are trying to outbid or push out their AI rivals?
Kearney: Yeah. So I was talking to one big bitcoin miner, and they mentioned that one of the strategies that crypto miners are using right now in their conversations with utilities to try to get power contracts over, let’s say, an AI data center developer is by using the fact that crypto mining can be a flexible load, meaning that it can pretty rapidly turn on or off or curtail its electricity use. AI data centers cannot be interrupted. I mean, that would lead to massive losses, you know, in value. So that’s one of the ways that cryptocurrency miners are sort of pitching themselves. And so certainly, there are these conversations happening, and there’s the competition happening.
McCarty Carino: Overall, how do you see this kind of interplay between these two energy-hungry industries playing out in the near term?
Kearney: The big bitcoin miners, they own their land, they own or have long-term contracts for different energy supplies and assets, so they have something to lease or sell to data center developers that need power right away. And then there’s everyone else, all of the miners that range from like maybe a midsize company to someone who has a mining operation in their garage, they will be dealing with — along with everybody else who buys power from the grid — rising power prices in a lot of cases, and I think that will end up being really difficult for the smaller bitcoin miners, who don’t really have a lot to offer to this other industry. As far as the big bitcoin miners, they’re doing deals, they’re doing these kind of subcontracting deals and leases. And so it seems like there’s going to be more and more of a move towards that.
McCarty Carino: Is AI going to be a pressure on kind of the crypto industry that starts to crowd out some of the players, just by virtue of, you know, even some of the opportunities that there may be in AI data centers, you know?
Kearney: Yeah, I think that that’s pretty much the consensus now. And that is happening now to a kind of small degree. We’ve talked to some analysts who think that in the next couple of years, you will see about 20% of bitcoin mining go towards AI data centers. So yeah, I could see in the next couple of years, when these AI data centers are supposed to really get up and running, there being more and more of a shift by the big crypto mining companies towards AI, and instead of doing their regular mining business, leasing or selling for the purpose of generative AI and that type of thing.
In early September, Elon Musk tweeted that the xAI data center in Memphis reportedly brought all of its 100,000 advanced Nvidia graphics processing units, or GPUs, online at the same time — something of a milestone for any AI data center.
Others have pointed out, though, that Musk might have exaggerated the point since no other AI company has managed to do the same, due to networking and connection limitations among GPUs and the energy limitations put on the xAI data center.
According to reporting in The Information, xAI likely has access to only 50 megawatts of electricity currently, or enough to power about half the chips.
My Marketplace colleague Samantha Fields recently reported that the U.S. electrical grid added more than 20 gigawatts of generation capacity in the first half of 2024.
But is that enough to meet rising demand from the tech sector? To quote one expert from that piece: “Uh, not really.”
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