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AI Boom Fuels Risky $3.3B Debt for Data Centers
23 Apr
Summary
- Core Scientific sold $3.3 billion in high-yield notes for AI infrastructure.
- The bonds offer one of the highest yields for junk bonds this year.
- Firms building AI infrastructure have raised over $19 billion in risky debt.
Core Scientific Inc. recently secured $3.3 billion through a high-yield note sale, a substantial borrowing aimed at funding the construction of AI infrastructure. The five-year bonds were issued with a yield of 7.933%, reflecting one of the highest rates for data-center-linked junk bond offerings in the current year. This financing underscores the immense capital requirements driven by the rapid expansion of artificial intelligence, which has strained resources for data center space, processing chips, and power.
Companies involved in the buildout of AI infrastructure have tapped extensively into the US debt market, raising over $19 billion from riskier bonds so far this year. The Austin, Texas-based Core Scientific is developing data centers across five states, with a 12-year contract with CoreWeave Inc. projected to generate approximately $10 billion in revenue. Despite this, elevated exposure to CoreWeave, a tenant with a speculative-grade rating, impacted the offering's credit rating. The proceeds from the note sale will fund debt service reserves and support parent company operations, including repaying a term loan and ensuring the timely completion of data center projects in Georgia, Texas, North Carolina, and Oklahoma.
