Welcome back! This is Canaan's weekly newsletter on Bitcoin mining, energy, and compute infrastructure.
 

CoreWeave began in 2017 as an Ethereum miner and became a cloud company after the 2018 crypto downturn left it with a large GPU inventory. Last week its debt started trading the way miners' did in 2022: below 80 cents on the dollar, at yields near 15%. AI borrowed mining's hardware playbook. It may be borrowing its credit cycle too.
 

CoreWeave's 2032 notes slipped below 80 cents on the dollar, and its shares fell 15.5%. Oracle and Nebius followed, along with listed miners that now lease capacity to AI. Bernstein called it "a sharper repricing of an existing financing risk."
 

https://x.com/chamath/status/2110128893680378299

In late 2021, ten listed miners guided investors to a combined 67 EH/s by the end of 2022, nearly four times what they were running. They were promising a rapid expansion in production capacity. Investors got excited, and the public miner boom followed. Some say neoclouds are now acting like those miners did, sitting at the center of the buildout and carrying most of its leverage. In the second quarter, CoreWeave generated $679 million of operating cash flow against $6.4 billion of cash spending on property and equipment.

Mining knows how the next part went. Rates rose, bitcoin fell, and hashprice dropped about 86% from its 2021 peak to its November 2022 low. New-generation machines lost a lot of their value, and many had been pledged as collateral. Lenders pulled back, forced sales followed, and North America's largest listed miner filed for Chapter 11 in December 2022.

There are some key differences, though. Miners sold into a spot market; neoclouds sell multi-year contracts, much of CoreWeave's with Microsoft, Meta and OpenAI. And GPU rental rates keep rising.
 

Cost of capital is the pressure point that has to be considered here. JonesTrading puts the selloff down to financing rather than demand. The Fed raised rates in September for the first time in three years, and Gimme Credit has warned the credit selloff could become self-fulfilling.
 

Another big difference is the political component. Mining's downturn came with a state moratorium, a proposed federal tax on its electricity and steady scrutiny of its energy use. AI infrastructure is treated as national strategy, with data center permitting on a fast track and much of the economy's growth riding on it.
 

If the parallel holds, mining's lesson is in what came after. Assets shifted from the most leveraged operators to those with cheap power and little debt, and the competition moved to joules per terahash. Canaan built its A15 series for that market. The largest listed miner to go bankrupt in 2022 now earns most of its revenue leasing capacity to CoreWeave. For both cycles, leverage is what sets the pace, but power costs, financing discipline and fleet efficiency together are ultimately what decide who is still standing at the end.

In the News

• Nscale, Anthropic Discuss Second $45 Billion AI Computing Deal: Report

• EverWind's Anthropic Data Center Faces Backlash Over Power, Water

• Fermi details $6.5 billion, 15-year TensorWave lease for 222 MW at Project Matador

• IREN proposes 900 MW Redbank data center near Wagga Wagga, outside its secured-power portfolio

• Oracle executive walks back El Paso Electric proposal after county pushback

Network at a Glance

• BTC price (USD): ~$84,666

• Network hashrate: 1056.4 EH/s

• Difficulty: 140.5 T

• Hashprice: ~$38.01 / PH / day

Project Spotlight

Canaan unveiled the Avalon A1566 at Bitcoin Asia in Hong Kong on May 9, 2024, less than three weeks after the fourth halving cut the block subsidy in half. With revenue per terahash suddenly lower, Canaan pitched the A1566 as a machine to help miners adapt to post-halving economics.
 

Built on the A15 chip, the air-cooled unit delivers 185 TH/s at a targeted 18.5 J/TH, drawing about 3,420 W. That is the same power as Canaan's 2020 flagship, the AvalonMiner 1246, for roughly twice the hashrate.

https://x.com/canaanio/status/1794900632589177084

The A1566 is the base model of a family. Its siblings include the immersion-cooled A1566I and the hydro-cooled A1566HA, the unit behind Canaan's Nordic district heating project: same chip, three cooling designs, three very different sites.

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Disclaimer: This newsletter shares industry commentary and third-party news for informational purposes only. The views and opinions expressed by third-party sources are those of their respective authors and do not necessarily reflect the views of Canaan Inc.  For official news, please refer to Canaan’s press releases and SEC filings at https://investor.canaan-creative.com/.