Core Scientific is poised to raise $3.3 billion via a high-yield bond sale as part of its strategic shift towards AI-driven data center operations. The surging demand for AI services has led to a significant strain on data centers, power supply, and advanced chip technology, prompting firms to explore riskier debt markets to secure funding for their operations. Core Scientific, formerly a prominent bitcoin miner, recently sold $175 million in bitcoin to further accelerate its AI-focused transition. According to Bloomberg, borrowers associated with AI infrastructure have raised a substantial $17.9 billion in high-yield bonds so far this year.
Core Scientific is currently building six data centers designed to support AI workloads, with the capacity leased to CoreWeave under a 12-year agreement that could generate around $10 billion in revenue. This move follows a series of large-scale deals, including recent offerings tied to Google-backed data centers and CoreWeave, which collectively raised $6.7 billion. 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 the AI buildout. The company currently holds less than 1,000 bitcoin, according to CFO Jim Nygaard.
Core Scientific's pivot from bitcoin mining to AI hosting is driven by the pursuit of more lucrative margins. The company, founded in 2017, emerged as one of North America's largest bitcoin miners before filing for Chapter 11 in December 2022 due to high power costs and a weak bitcoin price.
It has since reorganized and been relisted on Nasdaq under the ticker CORZ. The transition from bitcoin mining to AI hosting offers more favorable margins, particularly in light of the April 2024 halving, which reduced block rewards and led to a decline in the average cash cost of mining one bitcoin. As the price of bitcoin has fluctuated, miners have become increasingly unprofitable, prompting them to explore alternative revenue streams.
The pivot towards AI hosting has enabled miners to leverage their existing data centers and power contracts, attracting the attention of major hyperscalers, including Microsoft and Google parent Alphabet. Core Scientific was among the first miners to make a large-scale pivot, sparking investor interest and fueling the AI push.
The company's shares have risen by approximately 6% and nearly 42% this year, while bitcoin has fallen by 11%.