Hut 8 Receives $150 Million Funding From Coatue

Hut 8 raises $150 million in funding, and its stock rises 4%, demonstrating the increasing need for Bitcoin miners’ processing power from AI.

TakeAway Points:

  • Coatue Management invested $150 million in Hut 8 (HUT) to construct AI infrastructure, increasing the company’s share price by over 4%.
  • Other bitcoin mining-related data centres also saw an increase from the investment; Applied Digital (APLD) added almost 10%, and Soluna Holdings (SLNH) increased by almost 17%.
  • Interest in bitcoin miners is rising as a result of AI companies’ increasing need for processing capacity, which could lead to more mergers and acquisitions.

AI Investment Increases Mining for Bitcoin

The intersection of artificial intelligence (AI) and cryptocurrency mining is creating new opportunities for Bitcoin miners. Hut 8 (HUT), a Miami-based Bitcoin mining company, saw its shares rise nearly 4% on Monday following a $150 million investment from Coatue Management. 

This investment, structured as convertible notes with an 8% annual interest rate and a conversion rate of $16.395 per share, underscores the growing demand for computing power from AI firms. Hut 8’s shares have fallen about 8% this year to around $12.30, giving the company a market capitalization of roughly $1.1 billion. However, the stock more than tripled last year after a significant downturn in 2022.

The investment from Coatue Management, a technology-oriented hedge fund and private equity firm, is expected to be completed by July 11. This move highlights the increasing interest in leveraging Bitcoin miners’ existing infrastructure to meet the surging demand for AI compute capacity. 

Hut 8, which operates 19 sites across North America, including Bitcoin mining, hosting, and managed services sites, as well as high-performance computing data centers, is well-positioned to capitalize on this trend.

Increase in Stocks for Bitcoin Mining

The investment in Hut 8 has had a ripple effect on other Bitcoin mining-related data centers that also service AI and high-performance computing (HPC). Soluna Holdings (SLNH) surged nearly 17%, and Applied Digital (APLD) added about 10% on Monday. 

This surge is driven by the increasing demand for computing power from AI and HPC firms, which often look to Bitcoin miners for their existing computing capacity and power supply agreements.

JPMorgan has noted that the demand for power by large-scale data centers and AI firms could lead to a new era of mergers and acquisitions (M&A) for Bitcoin miners with attractive power contracts. For instance, cloud computing provider CoreWeave recently signed a 200 megawatt (MW) deal with miner Core Scientific (CORZ) for AI-related services and offered to buy the entire company for over $1 billion. Although Core Scientific rejected the takeover, citing undervaluation, the deal underscores the strategic importance of power contracts in the AI and HPC sectors.

Riot’s Bid to Acquire Bitfarms

In a related development, Riot Platforms Inc. has called for a special meeting of shareholders at Bitfarms Ltd. to vote on three new board nominees as it seeks to take over the rival Bitcoin miner. 

Riot, which has built a nearly 15% stake in Bitfarms, made an unsolicited $950 million offer to buy the company last month. However, Bitfarms rebuffed the offer, leading Riot to withdraw its $2.30-per-share offer and push for boardroom changes to facilitate good-faith negotiations.

Riot has nominated three candidates for the Bitfarms board: John Delaney, the former mayor of Jacksonville, Florida; Ralph Goehring, a former energy company chief financial officer; and Amy Freedman, an adviser to Ewing Morris and the former CEO of Kingsdale Advisors. Bitfarms has 21 days to set a date for the special meeting, where shareholders will vote on the proposed board changes.

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