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 pushed data centers, power supply, and advanced chip technologies to their limits, prompting companies to explore riskier debt market options to secure funding for operational development. Core Scientific, formerly a prominent bitcoin miner, recently sold $175 million in bitcoin to further accelerate its AI-focused pivot. Borrowers associated with AI infrastructure have secured $17.9 billion in high-yield bonds so far this year, according to Bloomberg.
Core Scientific is 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. The company's 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 finance facilities leased to CoreWeave and an Alibaba unit. Core Scientific intends to utilize the proceeds to repay existing debt and establish reserves, while also supporting construction projects across multiple states if costs exceed available funds, highlighting the capital-intensive nature of AI infrastructure development.
The company currently holds fewer than 1,000 bitcoins, according to CFO Jim Nygaard. Core Scientific's pivot from bitcoin mining to AI hosting is driven by the pursuit of more lucrative 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 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 is primarily motivated by the potential for higher profit margins. Following the April 2024 halving, which reduced block rewards from 6.25 BTC to 3.125, and the subsequent increase in the average cash cost to mine one bitcoin, miners faced significant challenges in maintaining profitability. The decline in bitcoin prices, from over $125,000 to around $75,800, further exacerbated the situation, prompting miners to explore alternative revenue streams.
The emergence of AI has provided a new opportunity for miners, as their existing data centers and power contracts can be repurposed for hosting AI-powered computers. Core Scientific was one of the first miners to pivot towards AI on a large scale, capturing the attention of investors and sparking a broader industry shift.
The company's shares have increased by approximately 6% and are up nearly 42% this year, while bitcoin prices have fallen by 11%.