Shares of Core Scientific (CORZ), a major player in Bitcoin (BTCUSD) mining and a provider of digital infrastructure for high-performance computing (HPC), surged more than 33% on June 26, following The Wall Street Journal’s report of potential acquisition talks with AI hyperscaler CoreWeave (CRWV). The spike pushed Core Scientific’s market valuation to nearly $4.9 billion. That’s a staggering leap from CoreWeave’s rejected bid last year, which valued Core Scientific at just $1 billion.
While Core Scientific stock gained significantly, it could only be the beginning. If CoreWeave moves forward with acquiring Core Scientific, it will offer substantial strategic and financial benefits to CoreWeave. Thus, the deal could come at a hefty premium, potentially giving CORZ even more upside.
Why CoreWeave Could Pay a Significant Premium
Earlier this year, Core Scientific expanded its partnership with CoreWeave, signing a $1.2 billion agreement for additional contracted revenue. The deal positions Core Scientific as a go-to provider of specialized data centers for demanding HPC tasks. With this latest agreement, CoreWeave now has about 590 megawatts of HPC infrastructure capacity contracted with Core Scientific across six sites. This expanded footprint reflects CoreWeave’s growing need for high-density computing environments.
The numbers behind the partnership are eye-catching. Over the 12-year term of the contract, Core Scientific expects to generate a total of $10.2 billion in revenue from CoreWeave. That long-term revenue stream reflects the scale and strategic importance of the relationship between the two companies.
For CoreWeave, acquiring Core Scientific makes financial sense. The company is on track to pay billions in lease fees to use Core Scientific’s data centers over the next decade and will not gain ownership of the infrastructure. A takeover would allow CoreWeave to convert those lease expenses into owned assets, potentially saving money and securing long-term control over critical HPC capacity.
Market Responds Tepidly to CoreWeave Stock
The market took very different views of the two companies. While Core Scientific’s stock enjoyed investor enthusiasm, shares of CoreWeave edged slightly lower on June 26, ending the day down about 1%.
The muted response to CoreWeave may seem surprising, given the company’s impressive fundamentals. With a significant $25.9 billion backlog and booming demand for its artificial intelligence (AI) infrastructure services, CoreWeave’s business outlook appears promising. The company is rapidly expanding its platform capabilities, positioning itself as a key player in the AI infrastructure space.
However, CoreWeave remains unprofitable, reporting a net loss of $314.6 million in the first quarter, which is significantly higher than the $129.2 million loss from the same period a year earlier. Adding to the concerns is the company’s hefty debt load, which stood at about $8.7 billion as of March 31. While CoreWeave’s approach of aligning infrastructure investment with customer demand, using self-amortizing structures that gradually reduce leverage, helps mitigate some risk, the large scale of the debt remains a concern.
The market’s muted response to the rumored deal with Core Scientific may be rooted in these financial concerns. While the agreement could help CoreWeave expand capacity and reduce leasing costs, it might also strain its balance sheet further.
Notably, CoreWeave stock has appreciated over 300% from its initial public offering (IPO) price of $40. Moreover, analysts have a “Moderate Buy” consensus rating on CoreWeave stock.
How High Could Core Scientific Stock Go?
Core Scientific, which focuses on contracting its digital infrastructure for third-party HPC operations, has a “Strong Buy” consensus rating from Wall Street analysts. Moreover, the highest price target for CORZ stock is $24, implying 50% upside potential.
With surging AI demand, expanding strategic partnerships, and the possibility of a high-stakes acquisition, Core Scientific stock could rise even further.
Still, traders should remain vigilant for potential risks. The rumored acquisition deal isn’t guaranteed to go through. If it falls apart, it could spark a sharp pullback in CORZ shares.
