In a strategic move to propel its transition into AI-centric data center operations, Core Scientific is set to raise $3.3 billion through a high-yield bond sale. This development is driven by the surging demand for AI services, which has pushed data centers, power supply, and advanced chip technologies to their limits. To address this, companies are resorting to riskier debt market segments to secure necessary funds. Core Scientific, previously a bitcoin mining entity, recently sold $175 million worth of bitcoin to further bolster its AI-focused pivot.
According to a Bloomberg report, borrowers associated with AI infrastructure have collectively raised $17.9 billion in junk bonds this year. Core Scientific itself is developing six data centers designed to support AI workloads, with the capacity leased to CoreWeave under a 12-year agreement potentially yielding around $10 billion in revenue. This move follows a series of substantial deals, including recent offerings tied to Google-backed data centers and CoreWeave, which collectively raised $6.7 billion. Another company, Edged Compute, is currently marketing $1.3 billion in bonds to finance facilities leased to CoreWeave and an Alibaba subsidiary.
Core Scientific intends to utilize the proceeds to repay existing debt, fund reserves, and support construction across multiple states if costs exceed available funds, underscoring the capital-intensive nature of AI infrastructure development. The company currently holds less than 1,000 bitcoins, as stated by its CFO, Jim Nygaard. This strategic shift towards AI is largely driven by margin considerations. Following its founding in 2017, Core Scientific grew to become one of North America's largest bitcoin miners before filing for Chapter 11 in December 2022, due to high power costs and a declining bitcoin price.
After emerging from reorganization in January 2024 and being relisted on Nasdaq under the ticker CORZ, the company has been focusing on its AI hosting pivot. The April 2024 halving event, which reduced block rewards, and the subsequent increase in the average cash cost to mine one bitcoin, coupled with a downturn in the bitcoin price, rendered most mining operations unprofitable. In response, miners have been seeking alternative revenue streams, with AI hosting emerging as a viable solution.
The existing data centers and power contracts, once dedicated to bitcoin mining, have found a new use case in hosting AI-powered computers, attracting the attention of hyperscalers such as Microsoft and Google parent Alphabet. As one of the first large-scale miners to pivot towards AI, Core Scientific has captured the interest of investors and is driving the AI push.
The company's shares have seen a significant increase, rising by about 6% on Tuesday and nearly 42% this year, in contrast to the 11% decline in bitcoin's value.