Coatue Invests in Bitcoin Miner Hut 8 as Sector Joins AI Race

(Bloomberg) — Billionaire Philippe Laffont’s Coatue Management has become the latest firm to invest in the crypto mining industry’s AI transition.

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The technology-focused hedge fund and private equity firm has invested $150 million in Hut 8 Corp. through a convertible bond, the Miami-based Bitcoin miner said Monday. Hut 8, one of the largest public miners in terms of computing power, has become one of the industry’s earliest entrants into the high-performance computing business that can power productive AI applications.

Hut 8 has 19 sites, including 10 Bitcoin mining, hosting and managed services sites in Alberta, Canada, New York and Texas, five high-performance computing data centers in British Columbia and Ontario, and four power generation assets in Ontario has.

The investment comes as crypto miners seek to take advantage of their ready access to vast amounts of power that could meet growing demand from artificial intelligence firms. Shares of Core Scientific jumped after the company predicted $3.5 billion in revenue from hosting contracts with AI startup CoreWeave over the next 12 years. Another utility-turned-miner, Terawulf, has seen a surge in its stock price as it converts some of its Bitcoin mining infrastructure to power HPC data centers.

Coatue has invested in several AI firms, including OpenAI and CoreWeave, which are considering an IPO and are valued at $19 billion. Access to data centers and power has emerged as one of the biggest challenges in the expansion of budget-constrained AI firms. Earlier in his career, Laffont was a manager at Julian Robertson’s Tiger Management.

Using power-hungry specialized computers to verify encrypted transactions on the blockchain to earn rewards in the form of tokens, Bitcoin miners have built energy infrastructure to draw electricity from a grid or secure multi-year energy purchase agreements at a fixed price. Bitcoin prices have risen rapidly in the last few years. A software update in April, called the “halving” in Bitcoin, reduced mining revenues, encouraging miners to look for new sources of income.

The convertible note will pay interest at 8% per annum with an initial maturity of five years, subject to extension for up to three one-year extension periods at Hut 8’s option. This will be the company’s primary unsecured liability. The initial conversion price for the Note is $16.40 per share, subject to certain anti-dilution adjustments, which is a premium of approximately 45% to the 10-day volume weighted average price. The transaction is expected to be completed on or before July 11, according to the statement.

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Shares of Hut 8 have fallen about 8% this year to around $12.30, giving the company a market cap of about $1.1 billion. The stock has more than tripled in the past year after falling nearly 90% during the crypto markets downturn in 2022.

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