Google funds Bitcoin miners in the AI race

Tech giant Google has emerged as the main financial driver behind the rapid transformation of Bitcoin miners into artificial intelligence (AI) infrastructure providers.

Through a sophisticated 'credit engineering' mechanism, Alphabet has provided at least $5 billion in guarantees to support AI projects led by BTC mining giants including TeraWulf, Cipher Mining and Hut 8.

The Formula for Success: From Mining to Infrastructure

Instead of acquiring mining companies directly, Google uses a strategic financial structure. The miners confer already electrified land and high-voltage connections; Fluidstack, a data centre operator, signs multi-year leases for the 'critical IT load'.

Google intervenes by 'hedging' Fluidstack's obligations, turning previously unrated mining companies into reliable counterparties. This allows banks such as JP Morgan and Goldman Sachs to finance the projects as secure infrastructure debt, rather than as speculative investments in the crypto sector.

The Case Studies: TeraWulf, Cipher and Hut 8

The model is already a reality at TeraWulf's Lake Mariner campus, where Google increased its guarantee to $3.2 billion, securing a 14% stake through warrants. TeraWulf estimates contracted revenues of $6.7 billion, with a potential of $16 billion.

Cipher Mining followed a similar path, signing a 168-megawatt deal with Fluidstack. Here, Google's backing amounts to $1.4 billion, in exchange for a 5.4 per cent equity stake.

Finally, on 17 December, Hut 8 Corp. announced a 15-year deal worth $7 billion in Louisiana, made possible precisely by Mountain View's financial "backstop".

Why AI Beats Bitcoin

The pivot is dictated by brutal economic necessity. According to CoinShares data, the total cost of production for 1 BTC has risen to around $137,800 (including depreciation), while Bitcoin trades at around $90,000.

Mining companies have therefore announced more than $43 billion in AI contracts over the past year to seek stable cash flows, preferred by institutional lenders over volatile block rewards.

Risks and Prospects

Despite the financial rationale, operational execution presents challenges. AI requires continuous reliability standards, very different from 'best-effort' mining. Moreover, the heavy focus on Google creates a potential single point of failure.

While Google aggregates scarce power resources while avoiding antitrust controls on mergers, every megawatt taken away from Bitcoin reduces the power available for network security, making hashrate growth more expensive and complex.