Hyperscale Data has permanently switched off all Bitcoin mining machines at its Michigan facility, formally ending its mining operations at the site as the company shifts focus to artificial intelligence infrastructure. The decision follows an inspection by an undisclosed California-based neocloud provider, setting the stage for the facility to be repurposed for high-performance computing workloads.
The company initially built the Michigan site as a large Bitcoin mining operation. However, falling cryptocurrency mining profitability and rising institutional demand for AI compute capacity prompted a strategic reset. Hyperscale said it intends to sell the decommissioned mining hardware and redirect capital into the conversion project.
AI contract with neocloud provider
According to Hyperscale Data, the new customer has agreed to lease 20 megawatts of computing capacity under a 10-year master services agreement. The contract also includes two optional five-year extensions, meaning the relationship could last as long as two decades. Hyperscale estimates that the agreement could generate more than $1.2 billion in revenue over the maximum term, provided the customer exercises both extension options.
In addition, the company has an option to expand the contracted capacity by another 32 MW. If the customer takes that additional capacity, the projected lifetime revenue could rise above $3 billion. Hyperscale also stated that the overall Michigan campus is expected to support up to 340 MW once fully built out, suggesting substantial room for future expansion or additional tenants.
The neocloud provider is described as California-based but has not been named in public disclosures. This is common during early-stage data center deals because customers often prefer to avoid revealing contracts until technical assessments are complete. Hyperscale emphasized that the expansion plans remain preliminary and subject to financing, permits, equipment procurement and other conditions. The revenue estimates are not guaranteed and depend on the customer exercising extension options and additional capacity commitments.
Stock slips to record low
Investors reacted negatively to the news, sending Hyperscale Data shares to an all-time low. The stock closed at $0.1984 on Wednesday, down roughly 17% on the day. Earlier in the session, the share price touched an intraday low of $0.1932. The closing price represents a record low on a split-adjusted basis for the NYSE American-listed stock.
The decline comes just days after Hyperscale completed a one-for-five reverse stock split. According to a filing with the US Securities and Exchange Commission, the company's shares began trading on a split-adjusted basis on Aug. 25. Reverse stock splits are often used to lift a company's share price above exchange minimums, but in this case the stock has continued to fall, reflecting investor concerns about the costly AI transition and the shrinking Bitcoin treasury.
Bitcoin holdings cut dramatically
Hyperscale Data has been using its Bitcoin holdings as a source of capital for the Michigan campus redevelopment. The company's digital asset holdings have fallen sharply in recent weeks. On July 30, Hyperscale reported holding roughly 1,006 Bitcoin. The company also sold 100 BTC and arranged a Bitcoin-backed credit facility to fund early construction work.
On Tuesday, Hyperscale disclosed that it sold an additional 65 Bitcoin for $5.1 million during the week ending Aug. 30. The proceeds were designated for continued development of the site. As of Wednesday, third-party Bitcoin treasury trackers indicated that Hyperscale held only 215 Bitcoin, valued at approximately $16.7 million at current market prices. That represents a 79 percent decline from the late-July figure.
With just 215 BTC in its corporate treasury, Hyperscale now ranks 84th among publicly traded companies tracked for Bitcoin holdings. The Bitcoin liquidation has provided necessary cash but also leaves the company with far less exposure to Bitcoin's potential upside, a trade-off that some shareholders may find difficult to accept.
Why miners are pivoting to AI
Hyperscale's shift is part of a larger trend among Bitcoin miners and former miners moving into artificial intelligence data center services. The appeal is understandable: AI workloads, particularly large language model training and inference, require massive amounts of electricity and densely packed GPUs. Bitcoin mining facilities already have access to high-capacity power grids, substations, cooling infrastructure and security, making them attractive candidates for AI data center retrofits.
Several publicly traded mining companies have signed deals with specialized cloud providers in recent years. Core Scientific and others have entered long-term contracts with AI compute companies. The basic model involves converting existing energy infrastructure into high-performance computing environments. Revenue from AI customers is often more predictable, with long-term contractual commitments and higher profit margins per megawatt than cryptocurrency mining can provide.
Bitcoin mining is also an extremely competitive business. The periodic block reward halving reduces the number of new Bitcoin issued to miners, squeezing profit margins when the price does not increase enough to offset the drop. The market has also seen rising energy costs and difficulty levels that make older miners less efficient. For companies that own large amounts of land, power and industrial buildings, AI infrastructure offers a potential path to more stable revenue.
Potential upside and lingering risks
The Michigan project could represent a major source of future cash flow for Hyperscale Data. If the 20 MW agreement is fully exercised over 20 years, the average annual revenue would be roughly $60 million, based on the $1.2 billion estimate. If the additional 32 MW option is also picked up, the annual average could approach $150 million over the same extended term. Even a portion of that revenue would dwarf the income generated by selling Bitcoin mining hardware and custodying digital assets.
However, Hyperscale has warned
Source:Cointelegraph News