Source: Letter AI
Authors: Wang Jing, Xiao Jinya
On July 6, Bitcoin mining company TeraWulf signed a 20-year data center lease agreement worth approximately $19 billion. Two weeks later, another mining company, Hut 8, announced a long-term lease worth $9.8 billion to build an AI data center in Texas, leasing 352 MW of server space and power capacity to an undisclosed major client for 15 years, with total rent amounting to approximately $9.8 billion.
This is Hut 8’s second contract of equal scale at the Beacon Point campus, bringing the total contract value of both phases to $19.6 billion.
Caption: Hut 8 CEO Asher Genoot speaking at the Bitcoin Asia conference in Hong Kong
The companies that signed these two large orders both started out by mining Bitcoin.
Until just a few years ago, TeraWulf and Hut 8 primarily made their living by mining Bitcoin—adding more mining equipment when the price rose and shutting down部分 devices when the price fell or electricity costs were too high, causing their revenue to fluctuate significantly with the price of Bitcoin.
Some mining rigs are now being removed, and the original mining facilities are being renovated into AI data centers. Mining companies are shifting their business from mining cryptocurrencies themselves to renting out space and power to AI companies.
Mining rigs are constantly being phased out, but mining farms remain. The land, electricity, and grid connection rights once prepared for mining may now be more valuable than the rigs themselves.
Why have mining companies come to this point? It all starts with the bankruptcy of Core Scientific.
North America's "Mining King" went bankrupt in a year
From the second half of 2020 to the end of 2021, Bitcoin experienced a major bull market, with its price rising from approximately $10,000 to nearly $69,000.
Core Scientific has been continuously purchasing mining equipment and expanding its mining facilities during this bull market, constructing large-scale mining operations in Texas, North Carolina, Georgia, and other locations, becoming one of North America’s largest publicly traded mining companies.
Caption: Core Scientific’s Marble mine in North Carolina. (Source: Core Scientific)
The logic behind Core Scientific's aggressive expansion is straightforward. Bitcoin mining companies invest computing power to compete in the network; the higher their share of total hash rate, the more Bitcoin they typically earn. As long as the coin price remains high, buying more miners and building more mining facilities offers a faster path to recouping investments.
However, this expansion relies on a condition that mining companies cannot control: the price of Bitcoin must be high enough to cover equipment and electricity costs.
In 2022, this premise was broken. Bitcoin prices dropped sharply from their highs, while energy prices such as natural gas continued to rise, forcing mining companies to keep paying electricity bills and equipment costs. Every day the mining rigs operated generated new expenses, but the Bitcoin mined could no longer support previous expansion efforts.
By the end of the year, Core Scientific’s cash reserves were rapidly depleted, and the former North American “mining king” ultimately filed for bankruptcy protection.
Core Scientific is not the only mining company facing this situation; the entire industry is being squeezed by falling cryptocurrency prices and rising costs.
Another publicly traded mining company, Riot, mined 5,554 bitcoins in 2022, a 46% increase from the previous year, but its mining revenue decreased from $184 million to $157 million. The company reported a net loss of $509.6 million for the year, primarily due to impairments of mining equipment, bitcoins, and acquired assets.
Riot's data also reveals another pressure facing mining companies.
Mining is an ongoing equipment race. As more mining machines join the network, the Bitcoin network automatically increases the mining difficulty, reducing the amount of Bitcoin each individual machine can mine. Older machines are slower and consume more power, meaning the same electricity cost yields progressively lower returns.
To maintain production and reduce electricity costs, mining companies must continuously purchase new miners with higher hash rates and lower energy consumption. This means they not only have to keep paying electricity bills but also repeatedly invest capital to upgrade their equipment. When the coin price drops, both the newly purchased miners and the held bitcoins lose value, while electricity costs remain unchanged.
Deals that seem endlessly replicable in a bull market quickly become cash black holes in a bear market.
More critically, starting from early 2023, the price of Bitcoin gradually recovered from its low point and surpassed the previous bull market's all-time high in 2024. However, mining companies' profitability did not recover alongside the coin's price.
In April 2024, Bitcoin experienced its fourth halving, reducing the block reward from 6.25 BTC to 3.125 BTC.
The term "halving" refers to the Bitcoin network reducing the block reward by 50% approximately every four years.
This means that even with the same amount of computing power, mining companies will receive significantly fewer new bitcoins. Mining equipment, electricity, and labor costs do not decrease accordingly, while output is first halved, further compressing profit margins.
Caption: The Mempool.space chart shows a significant spike in Bitcoin transaction fees. (Source: Mempool.space)
Meanwhile, the total network hash rate continues to grow, and the equipment race has not slowed down due to the halving.
If mining companies do not upgrade their equipment, the cost of mining increases. If they do upgrade, they must continue to invest capital.
The income from rising coin prices will soon be mercilessly consumed by halving, mining competition, and equipment expenses.
Core Scientific was affected particularly noticeably.
In 2024, the company's Bitcoin mining output decreased by 52% year-over-year. By 2025, annual production fell further from 6,595 to 2,276 bitcoins, and self-mining revenue dropped from $409 million to $229 million, nearly halving.
Mining is becoming increasingly difficult, so Core Scientific is exploring alternative uses for its mining facilities.
Fortunately, even if the mining facilities are no longer used for Bitcoin mining, the land and power infrastructure previously purchased by Core Scientific can still be utilized. These sites are already connected to large-scale power grids and can support other power-intensive computing equipment.
This is precisely what AI companies lack the most.
Just a few months after Core Scientific completed its bankruptcy restructuring, another former colleague from the crypto industry came knocking.
The tenant tried twice to buy the landlord.
The old industry peer that came knocking was CoreWeave.
CoreWeave is now one of the most prominent AI cloud computing companies. It currently uses only GPUs from NVIDIA, which serves as its supplier, technology partner, and a major shareholder, with an additional $2 billion investment planned for CoreWeave in 2026. CoreWeave leverages large-scale GPU clusters to provide the computing power needed by large model companies for training and running models.
However, before becoming a major buyer of NVIDIA GPUs, CoreWeave was also a mining company that mined Ethereum.
In 2016, CoreWeave’s founding team bought their first GPU and placed it on a pool table in their New York office, mining their first Ethereum block. Since then, one graphics card has grown into hundreds, and then into tens of thousands.
After the crypto market entered a winter period from 2018 to 2019, CoreWeave took advantage of numerous mining companies exiting the market to purchase GPUs and data center resources at low prices.
Fortunately, CoreWeave uses GPUs to mine Ethereum. Unlike Bitcoin ASIC miners, which are designed for specific computations, GPUs have broader applications.
After the crypto market cooled down, CoreWeave began renting out these devices to visual effects companies and machine learning clients, gradually shifting from cryptocurrency mining to cloud computing services.
This shift later allowed CoreWeave to ride the wave of the generative AI boom. As large model companies scrambled for GPU computing power, CoreWeave’s graphics cards, data centers, and orchestration expertise suddenly found their purpose, propelling the company into the heart of the AI cloud computing market.
But as more and more GPUs are purchased, new problems arise: where should these machines be placed?
High-end GPUs can only generate real computing power when connected to sufficient power and network resources.
CoreWeave can buy more chips, but it’s difficult to find powered data centers in a short time.
On the other hand, Core Scientific has existing mining facilities, electricity access, and grid connection eligibility, but needs new customers who can make long-term rental payments.
Two companies that emerged from the crypto world met again amid the AI boom.
In June 2024, Core Scientific signed a 12-year contract with CoreWeave to provide approximately 200 megawatts of data center infrastructure. Since then, the two parties have continuously expanded their collaboration, and by early 2025, CoreWeave had secured power capacity nearing 590 megawatts.
A perfect match, utterly remarkable. CoreWeave became a tenant, while Core Scientific, leveraging its mining facilities left over from the previous bull market, transformed from a bankrupt mining company into an AI infrastructure provider.
The story quickly took a turn.
Shortly after signing its first leases, CoreWeave outright offered to acquire Core Scientific for approximately $1 billion. But Core Scientific deemed the $5.75 per share offer too low and refused to sell the company to its new tenant.
A year later, CoreWeave made another offer. This time, the two parties reached an agreement, with Core Scientific agreeing to accept an all-stock acquisition worth approximately $9 billion. However, some shareholders of Core Scientific believed that the company’s power resources would continue to appreciate, and that paying for the acquisition with CoreWeave stock would expose the deal’s value to fluctuations in CoreWeave’s share price.
In October 2025, the acquisition did not receive sufficient shareholder support, and both parties ultimately terminated the merger.
Although the sale didn’t go through, the fact that the tenant made two attempts to buy the landlord’s property highlights how much the value of the old mine site has changed. For AI companies eager to expand, the land, electricity, and grid connection rights controlled by Core Scientific are incredibly attractive—far more so than the outdated mining rigs.
Building a large-scale data center is more than just constructing a few server rooms. The project must first confirm whether the local power grid can supply sufficient electricity, then complete approvals for power transmission, transformation, and grid connection. As AI data centers collectively apply for power, grid connection waitlists in many regions of North America have stretched years into the future. Even if AI companies have already purchased GPUs, their equipment may remain idle due to prolonged delays in connecting the facility to the power grid.
Core Scientific has mining facilities with large-scale power access and potential for further upgrades, allowing AI companies to bypass the longest grid connection waiting period.
Core Scientific's collaboration with CoreWeave has also shown other mining companies the new value of old mining facilities.
In 2024, TeraWulf sold its 25% stake in the Nautilus mine for a transaction consideration of approximately $92 million.
Nautilus is a joint investment project by TeraWulf and energy company Talen Energy, built adjacent to the Susquehanna Nuclear Power Plant in Pennsylvania. It is the first bitcoin mining facility to directly use power from a nuclear plant and operate entirely on nuclear energy, and was once regarded as a model for clean-energy mining.
This transaction is highly symbolic. TeraWulf sold its stake in this iconic mine and reinvested the proceeds into AI and high-performance computing facilities.
Hut 8 directly spun off its mining operations. In 2025, Hut 8 separated the majority of its mining equipment and mining business to form a subsidiary, American Bitcoin, alongside investors including Eric Trump, the second son of former U.S. President Trump, and retained a majority equity stake.
Thereafter, American Bitcoin took charge of financing, purchasing mining equipment, mining, and holding Bitcoin. Hut 8 retained its electricity and data center resources, providing the site and operational services. After spinning off the mining business, Hut 8’s parent company began allocating more capital and focus toward developing AI data centers.
Following the lead of companies like Core Scientific, more mining firms are beginning to seek AI clients.
Are the good days back?
The mining company that secured AI customers first has already reaped the benefits.
In the first quarter of 2026, TeraWulf's AI data center leasing revenue reached $21 million, surpassing its $13 million Bitcoin mining revenue for the same period for the first time. On July 6, following the announcement of a $19 billion contract with Anthropic, TeraWulf's stock price rose as much as 19% intraday.
Caption: The original Century Aluminum smelter in Horse Cave, Kentucky, photographed in 2017. After acquisition by TeraWulf, the site is being converted into an AI data center for Anthropic.
Hut 8’s market response has been equally significant. In May 2026, it signed its first 15-year lease worth $9.8 billion for the Beacon Point campus in Texas. On July 20, the same client leased the second phase of the project, with a contract value of another $9.8 billion.
After the announcement, Hut 8's stock rose as much as 17% intraday, and the total contract value of the entire facility over the base lease term reached $19.6 billion.
Compared to mining income that heavily depends on coin prices, AI data center leases appear much more stable. Customers lock in power capacity in advance and commit to paying rent over a period of more than a decade. Mining companies can use these long-term contracts to secure financing from banks and bond investors, then use the funds to build data centers.
However, the pace of transformation varies among different mining companies.
Core Scientific, TeraWulf, and Hut 8 have signed long-term customers, with some projects already generating revenue.
IREN continues to bet on both sides, mining Bitcoin while also purchasing GPUs and operating AI cloud services.
CleanSpark continues to mine cryptocurrency while acquiring land and power resources suitable for building AI data centers and seeking potential tenants.
Another group of companies are still in the phase of construction and tenant acquisition. Bitfarms (literally "Bit Farm") has announced its gradual exit from Bitcoin mining and even changed its name to Keel Infrastructure, but it is still renovating its facilities and seeking clients. For these companies, announcing the transition is only the first step—they must now secure long-term customers and actually lease out their renovated mining sites.
However, even former mining companies that have successfully transitioned are far from being out of the woods.
The $19 billion and $9.8 billion figures represent cumulative contract values over the next 15 to 20 years, not amounts available today. The first capacity at the campus TeraWulf is building for Anthropic is expected to be operational in the second half of 2027. The first delivery of the data center for Hut 8’s second $9.8 billion lease agreement is scheduled for 2028.
Before大规模收租, mining companies must raise billions of dollars to build substations, liquid cooling systems, and network infrastructure, while meeting AI clients' requirements for delivery timelines, server density, and operational stability.
Long-term contracts can help them secure financing, but they do not mean the project has been completed, nor do they guarantee that the full amount stated in the contract will become profit.
Delays in construction, rising equipment costs, and increased financing expenses could all compress final returns. If an AI company’s computing power needs change or clients adjust their technology roadmap, projects not yet delivered may be scaled down or even renegotiated.
Mining companies are once again making large upfront investments, easily reminiscent of Core Scientific's bankruptcy in 2022.
During the last Bitcoin boom, mining companies pre-purchased mining equipment and expanded their facilities, betting that Bitcoin’s price would continue to rise. In this AI boom, they are again investing heavily in data centers, betting that AI companies will need more computing power over the next decade.
Ultimately, mining companies are still gambling, but their bet has shifted from Bitcoin’s price to the future computing power demand of AI companies over the next decade.
Maybe this is no longer important.
Where the money is, there love is.
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