Hut 8 Expands Horizons with GPU-as-a-Service
On September 26, Hut 8, one of North America’s premier Bitcoin mining companies, announced a significant milestone: its GPU-as-a-service segment has begun generating revenue. This development follows the successful deployment of its first GPU cluster, specifically designed for an AI cloud developer.
Details of the GPU Cluster Deployment
The newly deployed GPU cluster is located in a tier-three data center in Chicago and features multiple Hewlett Packard Enterprise (HPE) Cray supercomputers. The cluster is powered by an impressive array of 1,000 NVIDIA H100 GPUs, highlighting Hut 8’s commitment to delivering high-performance computing solutions. The configuration and commissioning of this cluster were made possible through partnerships with HPE and AdvizeX, ensuring optimal performance for its operations under the Highrise AI subsidiary.
Contract and Revenue Model
Hut 8 has secured a five-year contract with the AI cloud developer, which includes both fixed infrastructure payments and a revenue-sharing model. This strategic move enhances Hut 8’s revenue stream, providing a stable foundation as it ventures into the AI compute market. The CEO of Hut 8, Asher Genoot, expressed optimism about the launch, noting that it not only diversifies their compute layer but also positions the company for sustained growth and value creation.
Diversifying the Compute Layer
With the launch of this GPU-as-a-Service initiative, Hut 8 is effectively diversifying its operations beyond traditional Bitcoin mining. The company’s compute layer now encompasses AI computing, traditional cloud services, and its core Bitcoin mining activities. As Genoot articulated, establishing a well-structured AI compute business is anticipated to be financially and strategically beneficial, driving revenue diversification and enhancing long-term value.
Addressing Bitcoin Mining Challenges
While Bitcoin mining remains a fundamental aspect of Hut 8’s business model, the company recognizes the need to diversify its revenue streams. This approach aims to create a more resilient and sustainable business model, particularly in light of the recent Bitcoin halving event, which cut block rewards from 6.25 BTC to 3.125 BTC. This reduction means miners now earn half as much from each mined block, putting profitability at risk.
Rising Costs of Bitcoin Mining
Recent financial data disclosed by Hut 8 reveals that the cost associated with mining a single Bitcoin has significantly increased, jumping from $11,321 in Q2 2023 to $26,232 in Q2 2024. To counteract these rising costs and decreased profitability, Hut 8 has actively diversified its operations. The company has expanded into power services, digital infrastructure, and the GPU-as-a-service market, incorporating fixed infrastructure payments along with revenue sharing into its business model.
Comprehensive Service Offerings
Hut 8 is not only focused on mining but also offers a variety of other services. The company aids other businesses in designing, building, and operating their projects. Their offerings include data center space, cloud services, and internet connectivity solutions. Moreover, Hut 8 hosts mining equipment for external companies and engages in the sale and repair of mining equipment, creating a consistent revenue stream through long-term contracts.
Investment to Fuel Growth
In July, to further boost its expansion into AI customer service, Hut 8 successfully raised $150 million from the investment firm Coatue. This injection of capital will be instrumental in driving the company’s growth as it continues to innovate and diversify within the rapidly evolving tech landscape.