Core Scientific Bets on AI Computing for Exponential Growth

The value of Core Scientific could grow “exponentially” over the next few years due to its potential in AI computing. This was stated by the CEO of the mining company, Adam Sullivan, in an interview with Bernstein analysts, as reported by The Block.

However, the results will depend on the firm’s ability to expand beyond its initial agreement with its first client in the CoreWeave segment, the manager noted.

Securing deals totaling an additional 500 MW or 1 GW over several years could increase the company’s market capitalization from $2.5 billion to a potential $25-30 billion, Sullivan expressed confidence.

He joined Core Scientific in April 2023, roughly four months after one of the largest public bitcoin miners filed for bankruptcy.

The firm completed its reorganization process in January 2024.

In June, Core Scientific signed a 12-year contract with CoreWeave to provide 200 MW of infrastructure for hosting Nvidia graphics processors. The agreement is expected to generate $3.5 billion in revenue over its term.

Core believes its competitive advantage in the segment is the speed of providing capacity to start operations—within three years. Traditional players in the segment like Digital Reality, Equinix, Switch, or Cyrus One require three to five years.

Additionally, Sullivan believes that no miner could fulfill the conditions of their deal with CoreWeave due to a lack of relevant experience among staff. Although some cryptocurrency mining sites have suitable conditions (such as fiber optic communication lines, proximity to metropolises, and other factors), he acknowledged.

The agreement includes upgrading Core’s data centers to meet high-performance computing (HPC) requirements. According to Sullivan, some mining equipment from these facilities will be sold, while others will be relocated.

The head of Core noted that out of the 1.2 GW available capacity, 500 MW cannot be used for AI computing due to technical features and will remain in mining.

“Obviously, on the HPC side, revenue and gross profit are much higher, and the more contracts we can sign, the better the long-term business valuation will be. Therefore, for the mining direction, we are simply focused on cash return,” Sullivan stated.

The company does not plan to invest “significant capital” in upgrading bitcoin mining equipment except for advantageous offers. Sullivan included the purchase of chips from Block for an estimated $300 million among such offers.

“Currently, 20 to 25% of bitcoin mining revenue goes to upgrades or essentially maintaining capital expenditures without any real growth,” the CEO of Core clarified.

The company aims to ensure competitiveness in cryptocurrency mining by maximizing the efficiency of existing facilities, Sullivan emphasized.

Bitcoin miners could generate around $13.9 billion in additional annual revenue if they shift 20% of their energy capacities to high-performance computing, according to VanEck.

Bernstein analysts believe the potential of cryptocurrency miners in the AI segment is the main reason for institutional investors’ interest in them.