In 2021, the city of Denton, Texas, grappling with significant debt, welcomed a seemingly providential offer from Core Scientific, one of the world’s largest Bitcoin miners. The company proposed building a data center within city limits, promising substantial revenue in exchange for a significant power contract that would effectively double Denton’s energy consumption. Despite concerns from residents and some city officials about the project’s opacity and environmental impact, Denton accepted the deal, believing Core Scientific would bear all associated risks. However, just months after the facility became operational, Core Scientific, burdened by its own debt, filed for bankruptcy, leaving Denton with less revenue than anticipated and two unfinished data center buildings.
Fast forward to 2024, and Core Scientific, capitalizing on the burgeoning AI industry, has rebranded itself as a cloud computing provider for AI startups. The company announced its Denton facility would be repurposed into one of North America’s largest AI supercomputers. Denton’s local government, seemingly undeterred by the previous bankruptcy, approved an additional 100 MW to Core Scientific’s existing 297 MW power agreement. This increase would provide the facility with enough energy to power nearly 400,000 homes, a capacity exceeding even Elon Musk’s “Colossus” supercomputer in Memphis, Tennessee. This shift towards AI reflects a broader trend within the Bitcoin mining industry, with companies like Hut 8, Bitdeer, and Terawulf similarly adapting their data centers to accommodate the high-end chips required for AI model training. This transition was facilitated by a $3.5 billion contract with AI hyperscaler CoreWeave, providing Core Scientific with the necessary resources to host a massive array of Nvidia H100 GPUs.
Core Scientific’s transformation from crypto mining to AI computing in Denton represents a relatively seamless transition. The company has retired its mining equipment and is modifying existing infrastructure to support GPU servers, a process significantly simpler than constructing a new facility from scratch. The company, founded in 2017 by Myspace co-founder Aber Whitcomb, along with Darin Feinstein and CEO Mike Levitt, had expanded across the southern U.S. before encountering financial difficulties. Following bankruptcy, they secured a $500 million loan from creditors including BlackRock and Apollo Global Manager, enabling them to restructure their debt and emerge from Chapter 11. Despite the setback, Core Scientific reported $95 million in third-quarter revenue and $415 million for the year, operating nine data centers across several states.
Denton’s initial attraction for Core Scientific stemmed from the city’s readily available electricity and affordable real estate. The city’s power utility, Denton Municipal Electric (DME), was facing a $140 million debt following a devastating winter storm in 2021. Core Scientific’s proposal offered a potential $8 million annual revenue stream, a lifeline for the struggling utility. However, the project was shrouded in secrecy, with Core Scientific initially concealing its identity, leading to suspicion and resistance from community members. Despite criticisms and concerns about increased greenhouse gas emissions, the project proceeded after DME assured officials the risk rested solely with Core Scientific.
The bankruptcy filing in December 2022, attributed to market volatility and declining Bitcoin prices, disrupted the original agreement. While Denton still received some revenue, it was significantly less than projected due to the incomplete construction. Now, Core Scientific’s renewed commitment to Denton, with its pivot to AI computing, presents a significantly larger economic opportunity for the city. The proposed $6.1 billion investment is projected to generate $194 million in property tax revenue over ten years, coupled with the promise of hundreds of new jobs. This revitalized partnership aims to position Denton as a hub for high-performance computing and attract further technological investment.
However, the expanded project raises concerns about Denton’s commitment to its environmental goals. The city has achieved a 100% renewable energy offset since 2020, primarily through local contracts. The previous reliance on RECs (Renewable Energy Credits) to offset the crypto mine’s emissions raises questions about the sustainability of the new, larger AI computing facility. While DME assures continued reliance on renewable energy offsets, the specific strategy and its impact remain to be seen. Further, the AI data center’s continuous operation presents a challenge for demand response programs, which rely on large power consumers reducing consumption during peak demand. While Core Scientific previously participated in such a program for its crypto mining operation, its future participation with the AI supercomputer remains uncertain, potentially impacting the city’s grid stability during emergencies.
