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 put a strain on data centers, power supply, and advanced chip technology, prompting companies to explore riskier debt markets to secure funding for their operations.
Core Scientific, formerly a major bitcoin mining entity, recently sold $175 million in bitcoin to further its AI-focused transition. According to Bloomberg, borrowers associated with AI infrastructure have raised $17.9 billion in junk bonds this year alone.
Core Scientific is constructing six data centers designed to support AI workloads, with CoreWeave securing a 12-year lease that could generate $10 billion in revenue, as reported by sources familiar with the agreement. 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, 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 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 higher 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 prices.
Following its reorganization in January 2024, Core Scientific relisted on Nasdaq under the ticker CORZ. The shift from bitcoin mining to AI hosting is primarily motivated by the desire for better margins, as the bitcoin halving in April 2024 reduced block rewards, and rising power costs made mining less profitable. The value of existing data centers and power contracts has been rediscovered, as they can now be utilized for hosting AI-powered computers, attracting major hyperscalers like Microsoft, Google, and others.
Core Scientific was among the first to pivot towards AI on a large scale, capturing investors' attention and fueling the AI-driven push. The company's shares have seen a significant increase, with a 6% rise on Tuesday and a 42% growth this year, while bitcoin prices have fallen by 11%.