Core Scientific is set to issue $3.3 billion in high-yield bonds as part of its strategic shift towards AI-focused data center operations. The surge in demand for AI services has led to a significant strain on data centers, power supply, and advanced chip technology, prompting companies to seek funding from riskier debt market segments to support their operations. Core Scientific, formerly a bitcoin mining entity, recently sold $175 million in bitcoin to further its AI-focused transition. According to a Bloomberg report, borrowers associated with AI infrastructure have raised $17.9 billion in junk bonds this year.
Core Scientific is developing six data centers to support AI workloads, with a 12-year lease agreement with CoreWeave 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.
Core Scientific intends to utilize the bond sale 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 currently holds less than 1,000 bitcoins, according to its CFO, Jim Nygaard. Core Scientific's pivot from bitcoin mining to AI hosting is driven by the pursuit of higher profit 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 has allowed miners to leverage their existing assets, including data centers and power contracts, to host AI-powered computers. This strategic move has attracted the attention of hyperscalers, such as Microsoft and Google's parent company, Alphabet, and has sparked a significant AI-focused push. Core Scientific's shares have seen a significant increase, rising by about 6% on Tuesday and nearly 42% this year, while bitcoin prices have fallen by 11%.