Core Scientific is preparing to secure $3.3 billion in funding through a high-yield bond sale, as part of its strategic shift towards artificial intelligence-driven data center operations. The surge in demand for AI services has led to increased pressure on data centers, power supply, and advanced chip technology.
To address this, companies are exploring riskier debt market options to support their operational development. Core Scientific, formerly a bitcoin mining entity, recently sold $175 million in bitcoin to accelerate its AI-focused transition. According to Bloomberg, borrowers associated with AI infrastructure have raised $17.9 billion in high-yield bonds so far this year.
Core Scientific is currently 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. 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.
Another company, Edged Compute, is marketing $1.3 billion in bonds to fund facilities leased to CoreWeave and an Alibaba unit. Core Scientific intends to utilize the proceeds to repay existing debt and establish reserves, as well as support construction across multiple states if costs exceed available funds, highlighting the capital-intensive nature of AI 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 higher profit margins. The company was founded in 2017 and grew to become one of North America's largest bitcoin miners before filing for Chapter 11 in December 2022, due to high power costs and a declining bitcoin price.
After emerging from reorganization in January 2024 and being relisted on Nasdaq under the ticker CORZ, the company shifted its focus towards AI hosting. The April 2024 halving event, which reduced block rewards, and the subsequent rise in power costs, made mining unprofitable for many, prompting them to explore alternative revenue streams. The existing data centers and power contracts of miners have found a new application in hosting AI-powered computers, attracting the attention of major hyperscalers, including Microsoft and Google parent Alphabet. Core Scientific was among the first miners to make a large-scale pivot, capturing the attention of investors and fueling the AI-driven expansion.
The company's shares have seen a significant increase, rising about 6% on Tuesday and nearly 42% this year, while bitcoin prices have fallen 11%.