Core Scientific is set to raise $3.3 billion through a high-yield bond sale as part of its strategic shift towards AI-focused data center operations. The surge in demand for AI services has pushed the limits of data centers, power supply, and advanced chip technology, prompting firms to explore riskier debt markets to secure necessary funds. Core Scientific, previously a major bitcoin miner, recently sold $175 million in bitcoin to further its transition into AI. Borrowers associated with AI infrastructure have raised $17.9 billion in junk 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 expected to generate around $10 billion in revenue. This move follows several large 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, highlighting the capital-intensive nature of AI expansion. The company currently holds less than 1,000 bitcoin, as stated by CFO Jim Nygaard. Core Scientific's pivot from bitcoin mining to AI hosting is driven by margin considerations, as the bitcoin halving in April 2024 reduced block rewards, and rising power costs and competition rendered most miners unprofitable.
The company's existing data centers and power contracts have found a new use case in hosting AI-powered computers, attracting major hyperscalers like Microsoft and Alphabet. Core Scientific's shares have seen a significant increase, with a 6% rise on Tuesday and a nearly 42% increase this year, while bitcoin prices have fallen 11%.