Core Scientific Partners with CoreWeave in $3.5B Deal Balancing Bitcoin Mining and AI Cloud Hosting
Summary:
Core Scientific, a prominent US Bitcoin mining company, has announced a $3.5 billion deal with AI cloud provider CoreWeave. Under this agreement, Core Scientific will provide an additional 200 megawatt infrastructure to accommodate CoreWeave’s high-performance computing operations. This is predicted to generate over $3.5 billion in cumulative revenue over the initial 12-year contract period. This decision to invest in AI cloud infrastructure comes in response to challenges associated with reduced Bitcoin miner rewards following the fourth Bitcoin halving.
Core Scientific, a leading Bitcoin mining entity in the U.S., is pivoting towards artificial intelligence (AI) amidst issues brought forth by the recent BTC halving. On June 3, Core Scientific publicized a $3.5 billion partnership with AI cloud entity, CoreWeave. Under this arrangement, Core Scientific will add 200 megawatts (MW) of infrastructure to support CoreWeave’s high-performance computing (HPC) endeavors. The terms of the agreement anticipate creation of over $3.5 billion in collective revenue for Core Scientific over the initial 12-year duration. The projected mean annual revenue from these contracts approximates $290 million.
Core Scientific is leasing 18% of its overall infrastructure, a significant portion of its resources, for CoreWeave's use. In addition to the currently operative 745 MW infrastructure, Core Scientific held 372 MW of semi-constructed infrastructure at its two Texan data hubs as of April 2024.
This contract adds to a history of partnership between Core Scientific and CoreWeave. In March 2024, an agreement was made for Core Scientific to supply up to 16 MW of data center infrastructure in support of AI and HPC operations in a lengthy contract with CoreWeave.
Initially known as Atlantic Crypto, CoreWeave was established in 2017 by co-founders Michael Intrator, Brian Venturo, and Brannin McBee. The trio didn’t have any prior experience in the cloud domain; their backgrounds were primarily in energy futures trading. In May 2024, CoreWeave garnered a $7.5 billion debt facility from Blackstone, Magnetar, and Coatue. As per The Wall Street Journal, this funding round placed the company's valuation at $19 billion.
Core Scientific's amplified investment in AI cloud infrastructure has arisen amidst challenges following the fourth Bitcoin halving, which decreased Bitcoin miner rewards from 6.25 BTC per block to 3.125 BTC as of April 20, 2024. Given that the halving didn't immediately boost BTC price significantly, mining corporations have sought additional income streams to maintain their operations.
“Our intensified alliance with CoreWeave presents an avenue for Core Scientific to diversify our operational model and equitably split our holdings between Bitcoin mining and alternative computational hosting. This strategic move aims to optimize cash flow and minimize risk while still providing significant exposure to Bitcoin’s potential returns,” stated Core Scientific's CEO, Adam Sullivan.
Core Scientific announced this development a few months after overcoming bankruptcy in January 2024, marking an end to its 13-month restructuring phase.
Published At
6/4/2024 2:40:55 PM
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