Core Scientific is set to raise $3.3 billion through a high-yield bond sale to fuel its strategic shift towards AI-focused data center operations. The surge in demand for AI services has stretched data centers, power supply, and advanced chip capabilities to their limits, prompting companies to explore riskier debt market segments for funding. Core Scientific, formerly a prominent bitcoin miner, recently sold $175 million in bitcoin to accelerate its AI transition.
According to Bloomberg, borrowers associated with AI infrastructure have raised $17.9 billion in high-yield bonds so far this year. Core Scientific is building six data centers tailored to support AI workloads, with CoreWeave leasing the capacity 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 plans to utilize the proceeds to repay existing debt, fund reserves, and support construction across multiple states if costs exceed available funds, highlighting the capital-intensive nature of AI infrastructure development. 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's transition began after filing for Chapter 11 in December 2022, due to high power costs and a decline in bitcoin prices. It emerged from reorganization in January 2024 and was relisted on Nasdaq under the ticker CORZ. The shift from bitcoin mining to AI hosting is centered around maximizing profitability, as the margins for AI services are more favorable. With the rising costs of power and intense competition in the mining sector, many miners have become unprofitable, prompting them to seek alternative revenue streams.
The adoption of AI has provided a new use case for miners' existing assets, including data centers and power contracts, which are now being leveraged to host AI-powered computers. This development has attracted the attention of major hyperscalers, such as Microsoft and Alphabet, which are investing in AI infrastructure. Core Scientific's shares have seen a significant increase, rising by approximately 6% on Tuesday and nearly 42% this year, while bitcoin prices have fallen by 11%.