As part of its strategic shift towards AI-focused data center operations, Core Scientific is set to issue $3.3 billion in junk bonds. The increasing demand for AI services has put a strain on data centers, power supply, and advanced chips, prompting companies to explore riskier debt markets to secure funding for operational development.
Core Scientific, formerly a bitcoin mining entity, recently sold $175 million in bitcoin to further facilitate its AI transition. According to Bloomberg, borrowers associated with AI infrastructure have raised $17.9 billion in junk bonds this year. Core Scientific is building six data centers to support AI workloads, with a 12-year lease agreement with CoreWeave that could generate around $10 billion in revenue. This move follows a series of large deals, including recent offerings tied to Google-backed data centers and CoreWeave, which raised a combined $6.7 billion.
Core Scientific plans to utilize the bond 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 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 margin considerations. The company emerged from reorganization in January 2024 and was relisted on Nasdaq under the ticker CORZ. With the rising power costs and competition in bitcoin mining, many miners became unprofitable and had to explore alternative revenue streams. The shift to AI hosting has enabled miners to leverage their existing data centers and power contracts, attracting major players like Microsoft and Google.
Core Scientific was one of the first miners to make this pivot on a large scale, garnering investor attention and fueling the AI push. The company's shares have seen a significant increase, with a 6% rise on Tuesday and a 42% increase this year, while bitcoin prices have fallen by 11%.