Northern Data Under Fire: AI Chips, Tax Breaks, and the Shadow of Crypto Mining

European regulators have opened a high-profile investigation into Northern Data, a company that has tried to reinvent itself from a cryptocurrency mining heavyweight into an AI cloud provider. The case, which centers on a disputed €100 million VAT break tied to NVIDIA’s advanced H100 GPUs, highlights the blurry line between legitimate AI investment and opportunistic crypto-era tactics.

According to reports from Bloomberg, authorities in Sweden and Germany conducted raids in Boden and Frankfurt, uncovering evidence that Northern Data may have improperly used government-backed incentives meant for AI development.

The chips in question – NVIDIA’s H100 accelerators, valued collectively at around €400 million – were supposedly acquired to strengthen AI computing infrastructure. Instead, investigators allege that many of these units were diverted into cryptocurrency mining operations, a use case far removed from the AI promises under which the tax break was granted.

The controversy is magnified by Northern Data’s history. Once known for promoting itself as an “environmentally friendly” Bitcoin mining enterprise, the company expanded aggressively during the peak of the crypto boom. As the profitability of mining collapsed, Northern Data began shifting its narrative toward AI, riding the global hype wave around machine learning and large-scale computing. This pivot brought in not only new investors but also attracted significant government attention and incentives designed to strengthen Europe’s AI competitiveness.

What alarms regulators is the mismatch between the technical purpose of the hardware and its alleged real-world application. AI accelerators such as NVIDIA’s H100 are engineered to handle massive data throughput for neural networks and scientific modeling – not the hashing algorithms used in crypto mining. While technically possible to repurpose AI GPUs for mining, the practice is seen as inefficient and wasteful. Critics suggest that Northern Data’s real intention may have been to exploit the generous tax rebates, effectively reducing the cost of acquiring mining hardware under the guise of AI development.

The company’s connection to Tether, the controversial stablecoin issuer, adds another layer of intrigue. With Tether as a major backer, questions arise over whether the firm’s financial strategy was less about building cutting-edge AI infrastructure and more about sustaining speculative activities in digital assets. Observers note that this isn’t an isolated case: many tech firms that once thrived in the crypto sector are now rebranding as AI companies, often with little substance behind the buzzwords.

The case also underscores a broader tension in global tech policy. Governments are eager to foster AI growth, offering tax incentives and subsidies to prevent brain drain and infrastructure gaps. Yet this eagerness leaves room for exploitation. Critics warn that when companies use “AI” more as a marketing badge than an operational reality, it undermines public trust and risks funneling resources away from genuine innovation.

For European taxpayers, the scandal is more than just a corporate embarrassment. If proven, it would mean €100 million in public funds were effectively subsidizing a private crypto-mining scheme, while genuine AI startups still struggle to access comparable levels of support. As one analyst quipped, “This isn’t just about misusing GPUs – it’s about eroding the credibility of Europe’s entire AI strategy.”

With the investigation ongoing, the outcome could set a precedent for how governments verify the use of subsidized technology. It may also serve as a warning to companies that rebranding alone won’t protect them from scrutiny when billions in public and private money are at stake.