Core Scientific is poised to raise $3.3 billion via a high-yield bond sale, further solidifying its strategic shift towards AI-driven data center operations. The surge in demand for AI services has pushed data centers, power supply, and advanced chip technology to their limits, prompting companies to explore riskier debt market segments to secure funding for operational development.
Core Scientific, formerly a prominent bitcoin miner, recently sold $175 million in bitcoin to bolster its AI-focused pivot. Borrowers associated with AI infrastructure have raised a substantial $17.9 billion in high-yield bonds this year, according to Bloomberg. Core Scientific is developing six data centers designed to support AI workloads, with the capacity leased to CoreWeave under a 12-year agreement that is expected to 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. Another firm, Edged Compute, is currently marketing $1.3 billion in bonds to fund facilities leased to CoreWeave and an Alibaba unit. Core Scientific intends to utilize the proceeds to repay existing debt, replenish funds, and support construction projects across multiple states if costs exceed available resources, highlighting the capital-intensive nature of AI development. The company currently holds fewer than 1,000 bitcoin, as stated by CFO Jim Nygaard.
Core Scientific's strategic shift from bitcoin mining to AI hosting is driven by profit 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 decline in bitcoin price. Following reorganization in January 2024, Core Scientific was relisted on Nasdaq under the ticker CORZ. The transition from bitcoin mining to AI hosting is centered on enhancing profit margins, as the April 2024 halving and rising power costs rendered most mining operations unprofitable, prompting miners to seek alternative revenue streams.
The integration of AI has provided a new use case for existing data centers and power contracts, attracting major players like Microsoft, Google parent Alphabet, and others engaged in the AI race. Core Scientific was among the first miners to pivot on a large scale, capturing investors' attention and fueling the AI push.
The company's shares have seen a significant increase, rising about 6% on Tuesday and nearly 42% this year, while bitcoin has fallen 11%.