Bitcoin Miners' Power Contracts and AI Infrastructure Expansion

Bitcoin miners' existing electricity connections could command much greater value for AI development, but contracts with customers, builders and lenders determine shareholders' eventual returns. Mining ASICs offer little use for AI training, while converting mining properties requires substantial construction, denser cooling, advanced networking, financing and committed customers. Core Scientific operates a hosting business that provides facilities and supporting infrastructure for customers' computing equipment. However, SWI Group plans to sell computing capacity directly, requiring GPU investment and exposing SWI to equipment utilization and obsolescence risks.

SWI initially invested $500 million for approximately 38.3% of Genesis Digital Assets' equity and rights to 77.2% of the value of certain preferred-share liquidation preferences. SWI subsequently obtained control of the Bitcoin miner earlier this year. SWI announced an €800 million capital increase on October 12 to expand AI infrastructure. SWI reported first-half profit of €631.6 million, mainly from recognizing value associated with the Genesis investment.

SWI's June announcement described Genesis properties across 15 facilities with more than 1.3 GW of connections that were energized or approved. SWI's half-year results in September instead described approximately 1.2 GW of secured connections. SWI has not reconciled those figures, separated usable capacity by site, identified Genesis locations for GPUs, disclosed economically convertible capacity or revenue timing, or allocated a disclosed fundraising amount to Genesis. SWI Compute announced approximately $1 billion of NVIDIA system orders and initial customers on October 26, although some customer contracts remained unfinished. SWI separately announced an infrastructure partnership covering 13 MW in Spain.

Core Scientific's second-quarter filing recorded a first-quarter impairment of $266.5 million, comprising $151.6 million for mining machines and $114.9 million for mining infrastructure. Core Scientific's mining business has incurred gross losses as Bitcoin prices, mining revenue per unit of computing power and used-equipment values weakened. However, Core Scientific's AI hosting business has generated a positive gross margin. Texas regulators approved ERCOT's Batch Zero review procedure in June. Texas also ordered an audit covering approximately 474 GW of proposed connections for large electricity users. Electricity already available at a property, approved future capacity and a connection-queue position represent different stages of readiness for AI operations.

A facility with power usage effectiveness of 1.25 would allocate about 80 MW of a 100 MW electricity supply to computing and 20 MW to supporting operations. Nvidia's GB300 NVL72 specifications describe liquid-cooled racks containing 72 GPUs and consuming as much as 142 kilowatts per rack. CoinShares' September mining report estimated AI conversion costs at roughly $8 million to $15 million per MW, versus $700,000 to $1 million per MW for conventional mining infrastructure. A review covering more than $100 billion of AI agreements found approximately 550 MW generating bills against contracted capacity exceeding 4 GW. HIVE's $350 million AI contract required an estimated hardware investment of $185 million before most associated revenue could materialize.

Core Scientific reported second-quarter colocation revenue of $136.7 million. Core Scientific had 437 MW generating customer bills by mid-July. Core Scientific's quarterly filing identified $98.8 million of license fees and $35.1 million of reimbursed electricity costs, which carried matching expenses, with other services supplying the remainder.

April disclosures set most CoreWeave locations' initial base license fee at $100 per kilowatt monthly, with annual increases of 3.5% and utility expenses payable by CoreWeave. CoreWeave funds or reimburses approved construction expenses and can receive future fee credits of up to $1.5 million per MW for specified landlord-owned equipment, potentially halving relevant monthly payments. At the initial rate, a 1 MW allocation would yield $100,000 monthly before a 50% credit, reducing cash payments to $50,000 and recovering $1.5 million over 30 months before increases and other provisions. Core Scientific's filing explains that prepayments, construction credits and straight-line accounting can separate recognized revenue from cash receipts under a 12-year agreement.

The agreements specify daily delay credits of $20,000 and subsequently $30,000 under particular circumstances, while certain delays permit CoreWeave to cancel an order. One ground lease remains dependent on the associated electricity agreement continuing in effect. April disclosures describe Core Scientific's uncapped guarantee to complete specified financed projects if available construction funding falls short. Core Scientific recorded first-half 2026 capital expenditure of $954.2 million, including $180.9 million funded by CoreWeave.

A financing subsidiary issued $3.3 billion of secured notes in May at 7.75%, backed by specified data-center assets and rights, implying approximately $255.8 million in annual coupons before principal repayments. Principal installments are scheduled to start after the applicable rent commencement and exhaustion of tenant credits, but interest remains payable while credits are used.

Reuters reported on October 22 that short sellers had approximately $6 billion in unrealized October gains across five AI infrastructure companies, with CoreWeave and Core Scientific attracting substantial short interest. Reuters reported on October 26 that CoreWeave fell 4.5% and Core Scientific fell 1.7% before regular trading after Elon Musk warned about lenders' reluctance to finance specialized AI cloud providers. Cipher's recent $850 million financing illustrates another funding route for miners' transition, alongside potential additional debt obligations or shareholder dilution.