As it shifts focus toward artificial intelligence data center operations, Core Scientific (CORZ) is gearing up to secure $3.3 billion through a junk bond issuance. With the burgeoning demand for AI services pushing data centers and their resources to capacity, companies are increasingly turning to riskier debt markets for funding. Core Scientific previously sold $175 million worth of bitcoin last month to bolster its transition toward AI.
According to Bloomberg, entities associated with AI infrastructure have raised $17.9 billion in junk bonds this year alone. Core Scientific is constructing six data centers dedicated to AI workloads and has entered a 12-year lease agreement with CoreWeave that could yield approximately $10 billion in revenue, as reported by sources familiar with the transaction.
This strategic move follows other substantial deals within the sector, including recent offerings linked to Google-supported data centers and CoreWeave, which collectively raised $6.7 billion. Additionally, Edged Compute is marketing $1.3 billion in bonds to finance facilities leased to both CoreWeave and an Alibaba unit.
Core Scientific plans to utilize the bond proceeds for repaying existing debt and establishing reserves. It also intends to fund construction projects across multiple states if expenses surpass available funds, underscoring the capital-intensive nature of AI infrastructure development.
Despite these efforts, the company retains fewer than 1,000 bitcoins, as stated by CFO Jim Nygaard. Originally founded in 2017, Core Scientific grew into a leading bitcoin miner in North America until it filed for Chapter 11 in December 2022 due to high energy costs and declining bitcoin prices. After reorganization, it was relisted on Nasdaq under the CORZ ticker in January 2024.
The transition from bitcoin mining to AI hosting is driven by profit margins. Following the April 2024 halving, which reduced block rewards from 6.25 BTC to 3.125 BTC, and with rising energy costs, miners faced profitability challenges as BTC prices fell from over $125,000 to about $75,800. In response, many turned to AI hosting using their existing data centers and power contracts.
These assets now serve a new purpose: powering the computers necessary for AI tasks. Their established grid connections and cooling capabilities attract major players like Microsoft and Alphabet’s Google in the competitive AI landscape. Core Scientific was among the first miners to undertake such a large-scale pivot, garnering investor interest and propelling the shift toward AI.
Core Scientific’s shares rose approximately 6% on Tuesday, marking nearly a 42% increase for the year, while bitcoin experienced an 11% decline.