Core Scientific Expands into AI Hosting with CoreWeave Partnership
Core Scientific, Inc., one of North America’s leading digital infrastructure operators for Bitcoin mining, has announced a significant transformation of its business model through a series of 12-year contracts with AI hyperscaler CoreWeave. This strategic move aims to diversify Core Scientific’s revenue streams by integrating high-performance computing (HPC) services into its existing operations. This initiative is set to generate over $3.5 billion in cumulative revenue during the initial contract term, enhancing Core Scientific’s position in the burgeoning AI data center market.
Under the agreements, Core Scientific will provide approximately 200 megawatts (MW) of infrastructure to support CoreWeave’s HPC operations, specifically designed to accommodate NVIDIA GPUs. The modifications to Core Scientific’s existing sites will begin in the second half of 2024, with operations expected to commence in the first half of 2025. This development is crucial as it enables Core Scientific to maintain its Bitcoin mining capacity while also capturing growth opportunities in AI compute—a sector experiencing rapid expansion.
The partnership with CoreWeave is projected to significantly boost Core Scientific’s earnings power. The contracts are anticipated to generate an average annual revenue of approximately $290 million, contributing to a stable, recurring, long-term, and high-margin revenue stream. This shift not only diversifies Core Scientific’s income but also balances its portfolio between Bitcoin mining and alternative compute hosting, positioning the company to maximize cash flow and minimize risk.
Adam Sullivan, Core Scientific’s CEO, emphasized the strategic importance of this partnership, stating that it allows the company to leverage its vast digital infrastructure portfolio to deliver resilient and sustainable value for shareholders. The agreements include options for two renewal terms of five years each and potential expansion of additional megawatts at other sites, potentially making Core Scientific one of the largest data center operators in the United States.
Core Scientific’s pivot comes at a critical time when the demand for AI compute and infrastructure is surging. This demand has been driven by advancements in AI technologies and the need for immense computational power to train AI models. CoreWeave, backed by significant investors such as Nvidia Corp., recently raised substantial funding, including a $7.5 billion debt facility and $1.1 billion in preferred equity, valuing the company at $19 billion. This financial backing underscores the growing importance and potential profitability of AI data centers.
The AI partnership is particularly timely given the recent Bitcoin halving, which reduced miner rewards by 50%, prompting mining companies to seek additional revenue sources. Core Scientific’s ability to redeploy certain Bitcoin mining capacities to support HPC operations without disrupting its primary mining activities highlights its adaptive business strategy.
This trend of diversifying into AI compute is not unique to Core Scientific. Other Bitcoin mining companies, such as Bit Digital, Hive, and Hut 8, have also been integrating AI services into their operations. The overlap between Bitcoin mining and AI compute is driven by the similar infrastructure requirements—both needing energy-intensive and robust data centers. However, AI operations tend to be more capital-intensive but offer higher profitability, potentially enhancing gross profit margins for companies that manage to integrate both services effectively.
