Core Scientific is converting its Denton, Texas crypto mining facility into an AI supercomputer to serve infrastructure demand.

Three years ago, Core Scientific, one of the world's largest bitcoin miners, offered a lifeline to Denton, Texas, a community burdened with tens of millions of dollars in debt. The company proposed building a data center in exchange for a massive power contract that would double Denton's energy footprint, promising the city much needed revenue in the form of taxes and fees. Denton accepted, but within months of powering on, Core Scientific filed for bankruptcy, saddled with its own outstanding debt.

Core Scientific was founded in 2017 by Aber Whitcomb, who previously cofounded Myspace, along with Darin Feinstein and CEO Mike Levitt. The company expanded across the southern U.S., but filed for Chapter 11 bankruptcy in December 2022 after experiencing $434 million in losses the preceding quarter, citing liquidity issues caused by energy costs and bitcoin prices that fell 60% that year. In 2023, after filing for bankruptcy, it received a $500 million loan from creditors including BlackRock and Apollo Global Manager. After restructuring $400 million in debt, it received court approval to exit bankruptcy in January 2024. The company currently reports $95 million in third quarter revenue and $415 million in revenue for the year, operating nine data centers in Alabama, Georgia, Kentucky, North Carolina, North Dakota and Texas.

Now, riding the artificial intelligence boom, Core Scientific has reinvented itself as a cloud computing company for AI startups. Last month, the former crypto miner announced that its Denton facility will transform into what it claims will be one of the largest AI supercomputers in North America, with the city's local government approving an increase to its previously 297-megawatt power agreement by another 100 MWs, enough to run nearly 400,000 homes — a capacity larger than Elon Musk's "Colossus" supercomputer in Memphis, Tennessee. Core Scientific has retired its mining machines and will be updating existing buildings to support rows of GPU servers. In June, Core Scientific announced a $3.5 billion contract with AI hyperscaler CoreWeave to provide data center space for Nvidia H100 GPUs, allocating 200 MWs of power, a partnership that sparked a $4 billion increase in the market cap of 14 bitcoin miners with similar computing resources, according to JP Morgan. CoreWeave has ridden the AI wave to a $1.5 billion valuation and reported $250 million in revenue, establishing itself as one of the primary distributors of Nvidia chips by renting on-demand compute space to AI startups and recently striking a deal with Microsoft to provide potentially billions of dollars worth of GPUs to support Microsoft's partnership with OpenAI.

Denton was drawn to Core Scientific because of its abundance of electricity and cheap real estate, particularly after the city's power utility, Denton Municipal Electric (DME), incurred $210 million in electricity fees during a historic winter storm in 2021, leaving it $140 million in debt. When Core Scientific proposed its data center, promising the utility up to $8 million a year in revenue, many residents and city officials were skeptical because of its secretive nature and large energy footprint. Core Scientific did not initially disclose its identity to the public, and one city council member who voted against the proposal called it a "deal with the devil." Another council member said, "We don't need to allow an unidentified company to use our city's infrastructure to increase greenhouse gas emissions for the sole purpose of turning a profit." The partnership was announced in October 2021 and became operational four months later, but Core Scientific's bankruptcy in December 2022 meant Denton "received less than originally anticipated" because the project was never fully built out. According to Denton Municipal Electric, the city earned $2.3 million in revenue from the data center last year, though utility spokesperson Stuart Birdseye told Forbes that income from Core Scientific "was a net positive for the city in total." Now, with the expanded power capacity and new AI partnership, the city stands to bring in significantly more revenue.