Core Scientific is set to raise $3.3 billion through a high-yield bond sale as part of its strategic shift towards AI-driven data center operations. The surge in demand for AI services has led to increased pressure on data centers, power supply, and advanced chip technology, prompting companies to explore riskier debt markets to fund their operational development.
Core Scientific, formerly a prominent bitcoin mining entity, recently sold $175 million in bitcoin to further facilitate its AI-focused 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 currently building 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 significant 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 fund facilities leased to CoreWeave and an Alibaba subsidiary. Core Scientific intends to utilize the proceeds to repay existing debt, fund reserves, and support construction projects across multiple states if costs exceed available funds, highlighting the capital-intensive nature of AI development. The company still retains fewer than 1,000 bitcoins, according to CFO Jim Nygaard. Core Scientific's pivot from bitcoin mining to AI hosting is primarily driven by profit margins.
The company was founded in 2017 and grew into 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. It emerged from reorganization in January 2024 and was relisted on Nasdaq under the ticker CORZ.
The transition from bitcoin mining to AI hosting is centered around maximizing margins, as the April 2024 halving reduced block rewards, and the average cash cost to mine one bitcoin increased while the price of BTC itself declined. With rising power costs and competition, most miners became unprofitable and sought alternative revenue streams. The shift towards AI hosting has enabled miners to repurpose their existing data centers and power contracts, attracting major hyperscalers such as Microsoft and Google parent Alphabet.
Core Scientific was one of the first miners to pivot on a large scale, capturing investors' attention and sparking the AI push. The company's shares have risen by approximately 6% and are up nearly 42% this year, while bitcoin has fallen by 11%.