Core Scientific is set to raise $3.3 billion 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 a significant strain on data centers, power supply, and advanced chip capabilities, prompting companies to explore riskier debt market options to fund their operational development. Core Scientific, previously a major bitcoin mining entity, recently sold $175 million in bitcoin to accelerate its AI-focused pivot.
According to Bloomberg, borrowers associated with AI infrastructure have secured $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 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.
Another firm, Edged Compute, is currently 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, fund reserves, and support construction across multiple states if costs exceed available funds, highlighting the capital-intensive nature of the AI buildout. 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 primarily driven by margin considerations. The company, founded in 2017, 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 weak bitcoin price.
It emerged from reorganization in January 2024 and was relisted on Nasdaq under the ticker CORZ. The shift from bitcoin mining to AI hosting offers more favorable margins, particularly given the recent halving of block rewards and the rising average cash cost to mine one bitcoin.
With the price of BTC experiencing a downturn, miners have become unprofitable, prompting them to explore alternative revenue streams. The pivot towards AI hosting has enabled miners to leverage their existing assets, including data centers and power contracts, to host computers powering AI operations. This strategic shift has attracted the attention of hyperscalers, such as Microsoft and Google parent Alphabet, and has sparked the AI push.
Core Scientific's shares have experienced a significant increase, rising by approximately 6% on Tuesday and nearly 42% this year, while bitcoin has fallen by 11%.