CoreScientific Bets on AI After Bankruptcy Restructuring, Stock Soars 140%: $6.7 Billion Deal Fuels Growth

CoreScientific Bets on AI After Bankruptcy Restructuring, Stock Soars 140%: $6.7 Billion Deal Fuels GrowthCoreScientific, a US Bitcoin mining company that once faced bankruptcy, has made a significant shift to artificial intelligence following its restructuring and return to the stock market this January

CoreScientific Bets on AI After Bankruptcy Restructuring, Stock Soars 140%: $6.7 Billion Deal Fuels Growth

CoreScientific, a US Bitcoin mining company that once faced bankruptcy, has made a significant shift to artificial intelligence following its restructuring and return to the stock market this January. The company's stock price has surged 140% since the restructuring, and a $6.7 billion deal has further fueled its future growth.

CoreScientific Expands Partnership with CoreWeave: $6.7 Billion Agreement

On Tuesday, CoreScientific announced a $6.7 billion deal to expand its partnership with Nvidia-backed startup CoreWeave. CoreWeave is one of the leading providers of chip technology for running AI models, and CoreScientific will provide an additional 112 megawatts of computing infrastructure to support CoreWeave's operations.

The news sent CoreScientific's stock soaring 18.8% during Tuesday's trading session, closing at $9.76. The company expects the agreement to generate an additional $2 billion in revenue over the next 12 years, adding to the estimated $4.7 billion in revenue from its previous agreement with CoreWeave.

CoreScientific plans to provide around 382 megawatts of infrastructure to CoreWeave by the first half of 2026, with potential for an additional 118 megawatts of power at other CoreScientific sites. These sites are expected to begin conversion in the second half of 2024 and be fully operational by the first half of 2026.

Transitioning to AI: A New Direction for Bitcoin Mining Companies

CoreScientific's transformation is not an isolated case. In recent months, publicly traded Bitcoin mining companies have been shifting towards AI infrastructure businesses, possibly due to the decline in Bitcoin mining profitability after the halving in April.

These companies have already invested heavily in building data centers across the US, which can be repurposed to serve a new category of clients. However, analysts point out that converting to AI is not as simple as repurposing existing mining infrastructure and machines, as the demand and requirements for data networks are different.

Needham analysts wrote in a May report that almost all of the mining companies' current infrastructure needs to be "completely rebuilt to accommodate high-performance computing (HPC)."

Market Response: Bitcoin Mining Companies Reach New Market Capitalization Highs

Despite the challenges of the transition, the market has reacted positively to the shift of Bitcoin mining companies towards AI businesses. According to a JPMorgan report, the total market capitalization of the 14 major US-listed Bitcoin mining companies tracked reached a record high of $22.8 billion as of June 15, driven by the AI transformation.

For example, mining company BitDigital currently estimates that 27% of its revenue comes from AI. The company announced in June that it had entered an agreement with a customer to supply Nvidia GPUs at its data center in Iceland, which is expected to generate $92 million in annual revenue. Part of the funds used to pay for the GPUs came from the sale of some of its cryptocurrency holdings.

Additionally, Miami-based Hut8 announced in June that it had raised $150 million in debt from private equity firm Coatue to help build its AI data center.

CoreScientific's Future: Opportunities and Challenges Coexist

CoreScientific previously saw a 7.5% decline due to the impact of the global stock market downturn on cryptocurrency and AI companies. Analysts at CantorFitzgerald stated in a report that they viewed the sell-off as a buying opportunity for publicly traded mining stocks.

In June, CoreWeave offered to acquire CoreScientific for $1.02 billion, and the two companies reached a preliminary agreement shortly after. CoreScientific declined the offer. CoreScientific currently has a market capitalization of approximately $1.5 billion.

CoreScientific's transformation journey is just beginning, with both opportunities and challenges on the horizon. Whether it can successfully complete this transition and achieve success in the AI field will be a crucial test for the company's future development.

Summary:

CoreScientific's transformation has provided a new direction for Bitcoin mining companies and injected new vitality into the AI industry. In the future, as AI technology continues to develop, the ability of Bitcoin mining companies to seize opportunities and successfully transition will be a key focus for the market.