$3.5 Billion Deal to Expand into AI Mining Technology

$3.5 Billion Deal to Expand into AI Mining Technology

innovationMining

By Jakub Lazurek

04 Jun 2024 (about 1 month ago)

2 min read

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Core Scientific signs a $3.5 billion deal with CoreWeave to expand into AI and HPC, marking a major shift from Bitcoin mining to advanced computing.

Core Scientific, a leading crypto miner, has signed a major $3.5 billion, 12-year agreement with Nvidia-backed CoreWeave. This deal signals a strategic shift, moving Core Scientific beyond Bitcoin mining to high-performance computing (HPC) and artificial intelligence (AI).

The partnership will transform Core Scientific’s facilities, making them suitable for advanced AI applications. CoreWeave will invest $300 million in infrastructure upgrades, crucial for handling complex AI tasks.

Building on an existing partnership, the deal will upgrade Core Scientific’s infrastructure, allowing it to diversify its services. This shift is essential for balancing Bitcoin mining with AI hosting, boosting growth potential. CoreWeave will handle all initial capital investments, including the $300 million for upgrades. These costs will be recovered through hosting fees, minimizing financial risk for Core Scientific.

Core Scientific expects a significant boost in earnings from this deal, with projected annual revenues of around $290 million. The company's stock has risen by 40% this year, reflecting investor confidence. CEO Adam Sullivan stressed the strategic importance of diversifying. “Our relationship with CoreWeave helps us balance Bitcoin mining and AI hosting,” he said, aiming to maximize cash flow and reduce risk.

The timing is crucial as Core Scientific recently emerged from bankruptcy caused by the 2022 Bitcoin market crash. Under Sullivan’s leadership, the company restructured its debt and pursued more sustainable business models.

The agreement also includes options for further expansion. CoreWeave can increase its capacity at Core Scientific’s locations, with ongoing negotiations for additional contracts to enhance capabilities.

The move towards AI and HPC hosting is driven by the rising demand for AI infrastructure, sparked by technologies like OpenAI’s ChatGPT. Companies such as Bit Digital, Iris Energy, and Hut 8 are also diversifying beyond Bitcoin mining.

Experts note that AI operations, while requiring more capital, offer higher profits than Bitcoin mining. James Butterfill of CoinShares highlighted the advantage for Bitcoin miners in energy-intensive data centers, which are also suitable for AI tasks.

Core Scientific’s venture into AI and HPC hosting is a strategic response to the changing tech landscape. Aligning with CoreWeave positions the company at the forefront of technological advancements, ensuring long-term growth.

In conclusion, Core Scientific’s $3.5 billion deal with CoreWeave marks a major strategic shift. Balancing Bitcoin mining with AI and HPC hosting, the company aims to maximize cash flow and minimize risk. This move positions Core Scientific to benefit from the growing demand for AI infrastructure, ensuring resilience in a rapidly evolving market. As the tech landscape changes, Core Scientific’s diversification sets a new standard for the industry.

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