Chris’ note: Bitcoin mining stocks are on a tear this year. The five largest bitcoin mining stocks are up an average 342% so far in 2023. That compares with a 16% gain in the S&P 500.
Part of that surge is due to the rising price for bitcoin, which boosts their profit margins. But part of it is a result of the scramble to scale up ChatGPT and other AI systems.
And as you’ll hear below from Teeka Tiwari’s analyst Michael Gross, bitcoin miners have become a key part of this process. That’s because the same chips you use to mine bitcoin can be repurposed to power AI.
Read on below for how exactly bitcoin mining companies have been helping solve AI’s computing power shortage… And how you can take advantage of it.
Elon Musk is taking matters into his own hands.
Over the past two years, Tesla has been building a supercomputer called Dojo.
It’s able to process a vast amount of video data that will help improve the company’s self-driving technology.
In its most recent earnings call, Musk said Tesla had to build Dojo because of a major problem.
There’s a shortage of graphics processing units (“GPUs”).
These specialist microchips help create ultra-realistic graphics in video games, perform complex calculations for scientists, and power ChatGPT and other generative artificial intelligence (“AI”) models.
This is creating a surge in demand for GPUs. And chipmakers are having a tough time keeping up.
Sam Altman is the CEO of OpenAI and the creator of ChatGPT. He recently testified to Congress that the GPU shortage is hurting the chatbot’s ability to perform its tasks.
In fact, it took about 10,000 to 20,000 GPUs just to train ChatGPT on the enormous datasets it needed to process so it could respond to users’ questions and comments.
And OpenAI still needs roughly 30,000 more GPUs to scale up ChatGPT.
Tech giants such as Microsoft and Amazon also say they’re having trouble getting the GPUs they need.
In short, without enough GPUs to run these complex machines, AI can only process so much and progress so far.
So, if we want to implement AI in everything from powering self-driving vehicles… to things like advanced diagnostics and advancements in medicine… to leveling up the real-time utility of generative AIs… It’s clear we’re going to need a lot of computing power.
And a solution to this computing power shortage has come from an unexpected source – bitcoin miners.
Today, we’ll look at how these miners are taking advantage of the shortage. Plus, I’ll show you how you can get exposure to this fast-growing trend.
Bitcoin Miners Are Crushing It This Year
Bitcoin mining stocks have been crushing it lately.
So far this year, the top five bitcoin mining stocks by market value are up an average 342%. That compares with a 16% gain in the S&P 500.
And part of that market-thumping return is down to the role bitcoin miners are playing in the scaling out of AI.
Don’t worry if you’re not a crypto person…
Without getting too in the weeds, bitcoin mining involves solving complex mathematical puzzles to validate transactions on the bitcoin network.
Think of the miners as the network’s auditors. They make sure all bitcoin transactions are legitimate.
In return, miners earn a reward of 6.25 bitcoins for each “block” – or group – of transactions they verify.
This mining process involves running racks of GPUs that can do trillions of calculations per second.
Now, these mining companies are repurposing their older GPUs to help perform computations for AI.
From Mining Bitcoin to Powering AI
That’s what Hut 8 Mining has done.
It’s a bitcoin mining company based in Alberta, Canada. And it trades on the Nasdaq under the ticker HUT.
Hut 8 recently bought five data centers in Canada. And it filled them with its older GPUs.
Instead of mining for bitcoin, they’re now performing visual effects rendering and machine learning for clients in the gaming and entertainment industries.
It’s also delivering computing power to firm XYZ AI to support the text-to-graphic features of its platform, which it uses to create 3D imagery for its video games.
Hut 8 Mining earns about 24% of its revenue from this new computing segment.
And it’s not the only bitcoin miner profiting from the AI boom.
Mining company Hive Digital Technologies has also begun offering its services to companies in need of computing power to run their AI apps.
Hive executive chairman Frank Holmes says the company will earn as much as $1.3 million over the next year from these AI services.
And Applied Digital – which designs and builds data centers – has partnered with information technology firm Supermicro to build servers that can run AI apps.
Applied Digital boss Wes Cummins says the industry is in the middle of its most dynamic change in decades. He added that Applied Digital will move to help support the next wave of AI-powered apps.
And it’s only a matter of time before other bitcoin miners jump in on this emerging opportunity.
The “AI Coin” Solving the GPU Shortage
Bitcoin miners’ profits go up and down based off the price of bitcoin.
That means some bitcoin miners could see gains as high as 875% from current levels should the price of bitcoin reach $120,000 in the next two years… as colleague Teeka Tiwari believes.
But while they’re waiting to reap these rewards, AI computing contracts are providing bitcoin miners with stable, recurring revenue.
By adding these computing services, bitcoin miners can protect their revenue stream in environments where bitcoin’s price is falling.
That will help lower the risk of investing in these miners.
If you’re looking for broad exposure to this trend, consider the Amplify Transformational Data Sharing ETF (BLOK).
This exchange-traded fund holds some of the largest bitcoin miners. But it also includes companies in the broader blockchain ecosystem. So, it’s not a pure play on miners.
And if you want to a more speculative way to play the GPU shortage, I urge you to check out Teeka special strategy session – The #1 Coin for the AI Boom.
He revealed details of a crypto project that’s solving the GPU shortage in a unique way.
And you can still buy the “AI coin” this project issues for about $1. That means you can get in on the ground floor.
In fact, based on Teeka’s research, this project has at least 100x more upside potential than popular AI stocks at current levels.
Don’t wait to tune in, though. Teeka’s publisher is taking down his strategy session at midnight tonight.
So, make sure to watch the replay before it’s too late.
Regards,
Michael Gross
Analyst, Palm Beach Daily