Tether's Surprising Leap into Cloud GPU Market with $420 Million Investment

Tether Group, known for its $86.5 billion stablecoin, is venturing into the cloud GPU market through a partnership with Northern Data.
They’ve invested $420 million in 10,000 Nvidia H100 GPUs, securing a 20% equity stake in Northern Data.

Tether Group, primarily known for its massive $86.5 billion stablecoin, has taken a bold step into the tech sector by partnering with German bitcoin miner Northern Data. Together, they aim to establish a significant presence in the cloud GPU market, with a particular focus on Nvidia’s cutting-edge AI chips.

Nvidia’s H100 GPUs, priced at a staggering $40,000 per unit, have become invaluable in the tech industry. As artificial intelligence companies increasingly require powerful GPUs to process vast datasets, competition for these graphics processing units has intensified. Surprisingly, Tether Group has joined the race, investing a total of $420 million to acquire 10,000 H100 GPUs. This strategic move also grants them a 20% equity stake in Northern Data.

While ethereum mining has rendered these GPUs obsolete due to recent architectural changes, they have found a new purpose in AI-focused tasks. Shifting from cryptocurrency to AI is not a unique strategy, as exemplified by New Jersey-based startup Coreweave, which transitioned from using GPUs for ethereum calculations to supporting major AI projects, including collaborations with Microsoft.

Northern Data’s CEO, Aroosh Thillainathan, views this venture as a significant opportunity. With a growing demand for GPUs and supply chains stretched thin, securing such a substantial allocation positions them favorably. Furthermore, this deal could elevate Northern Data to the status of Europe’s premier cloud GPU operator, a position currently dominated by giants like Amazon, Microsoft Azure, and Oracle.

Deal Complexity and Tether’s Expanding Vision

The agreement between Tether Group and Northern Data has intricate elements. Tether will acquire the GPUs through an intermediary, the Irish shell company Damoon. In return, Northern Data will receive a 70% stake in Damoon, compensated by offering shares equivalent to 20% of its ownership. The precise financial details and final ownership percentages remain somewhat ambiguous due to the rapid and competitive nature of GPU acquisitions.

Examining Northern Data’s history reveals a tendency to use shell entities, often associated with stakeholders, for purchasing bitcoin mining equipment. This association with controversial entities and fluctuating financials may raise concerns for some observers.

For Tether Group, this collaboration represents a strategic departure from its typical operations. The company has faced controversies in recent years, particularly regarding the stability and backing of its stablecoin. Nonetheless, Tether continues to diversify its investment portfolio, evident in its ventures into bitcoin mining operations and other tech startups.

As the realms of technology and finance evolve, partnerships between crypto entities and tech firms like this one may become commonplace, ushering in unprecedented innovations and synergies.