Bitcoin miner Bit Digital (BTBT) is expanding into the artificial intelligence (AI) infrastructure business to diversify its revenue stream away from bitcoin (BTC) mining and ether (ETH) staking.

A new unit will buy and rent out computers to AI companies that require high-performance computing (HPC) for their operations, deploying the machines at a third-party data center, Bit Digital said in a statement on Monday.

Crypto miners are increasingly turning to AI and HPC-related businesses as the prolonged crypto winter batters their profits. The strategy is one way to add revenue immediately because those activities have the same requirements as mining: large data centers with infrastructures such as cooling systems, security and access to cheap energy.

The New York-based firm already has a client for the service: "Bit Digital has entered into a binding term sheet to provide cloud-based GPU resources to a customer with an initial contract duration spanning one to three years," according to the statement.

The miner will rent out a minimum of 1,024 graphic processing units (GPU) and a maximum of 4,096 GPUs to the unidentified customer. The deal, at minimum, is expected to generate between $23 million and $27 million in annual revenue, starting January 2024. If extended to three years and with the maximum number of GPUs, the contract could generate more than $250 million of revenue, the mining firm said.

Bit Digital had revenue of about $9 million in the fiscal second quarter and $32 million for fiscal 2022.

To facilitate the deal, Big Digital will buy 132 units of FusionOne HPC from xFusion Digital Technologies – a global provider of digital infrastructure and services – for approximately $35 million. Each of the units includes Nvidia's HGX H100 8-GPUs, for a total of 1,056 GPUs, delivery of which is expected by year-end.

Bit Digital will finance the purchase with a mix of cash, digital assets on the balance sheet, new equity issuance and potentially equipment financing. The firm has already paid a deposit and has enough money on its balance sheet to fund the rest without raising additional capital, the miner told CoinDesk in an emailed statement. It will look for external funding if more GPUs are required.

The company had about $20.8 million of cash and $50.7 million worth of digital assets on its balance sheet as of Sept. 30.

Bit Digital said the contract is expected to provide "substantially higher margins" than its existing bitcoin mining and ether staking operations, helping the company diversify its revenue stream.

In fact, the AI and HPC business margin is so much higher than mining alone that Bit Digital thinks its AI business will be able to help generate enough cash flow to cover the needs of its core business, regardless of where the bitcoin price is and with upcoming halving that would cut mining rewards in half.

"This business line aims to provide a non-correlated income stream that will help the Company weather potential downturns in its core bitcoin mining and ETH staking businesses," CEO Sam Tabar said in the statement.

The company is not alone. Most recently, miner Hive Digital (HIVE) said it is converting 38,000 Nvidia GPU cards used to mine Ethereum and other cryptocurrencies into an on-demand GPU cloud service. The miner said its HPC and AI business is generating 15 times more revenue than bitcoin mining on a per-megawatt basis.

"If the bitcoin price remains at current levels through the halving, we expect significant pain across the industry as margins are cut in half," Bit Digital told CoinDesk.

"Having a reliable income stream in place that is uncorrelated to bitcoin prices will help us endure that potential downturn, and in turn allow us to be opportunistic and grow in a countercyclical fashion if the market mining-related assets become distressed," the firm added.

Read more: Bitcoin Halving Is Coming and Only the Most Efficient Miners Will Survive