Core Scientific is set to launch a $3.3 billion junk bond offering as part of its strategic shift towards AI-centric data center operations. The surge in demand for AI services has led to increased 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 accelerate its AI-focused transition. According to Bloomberg, borrowers associated with AI infrastructure have raised $17.9 billion in junk bonds this year.
Core Scientific is developing six data centers designed 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-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 proceeds to repay existing debt, fund reserves, and support construction projects across multiple states if costs exceed available funds, underscoring 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 margins, as the bitcoin mining industry faced significant challenges due to rising power costs and a decline in bitcoin prices. The company's existing data centers and power contracts have found new utility in hosting AI-powered computers, attracting major hyperscalers such as Microsoft and Alphabet. Core Scientific's shares have seen a significant increase, rising by about 6% on Tuesday and nearly 42% this year, while bitcoin prices have fallen by 11%.