Core Scientific's Stock Surge: Riding the AI Infrastructure Wave Amid Regulatory Tailwinds

Core Scientific (CSTR) has emerged as a pivotal player in the AI infrastructure boom, with its stock soaring 35% in early 2025 amid acquisition rumors and regulatory tailwinds. The company's transformation from a distressed bitcoin miner to a high-performance computing (HPC) provider is now fueling investor optimism, as data center demand surges and policymakers prioritize AI investment. But is this rally sustainable, and what risks lie ahead?

The Infrastructure Pivot: Bitcoin to AI

Core Scientific's turnaround began in 2024 after exiting bankruptcy. The company shifted focus from volatile cryptocurrency mining to AI infrastructure, a move now bearing fruit. Its partnership with CoreWeave—announced in June - includes $10.2 billion in revenue commitments through 2036, with 590 megawatts of infrastructure to be operational by early 2026. This deal positions Core Scientific as a critical supplier to firms racing to build AI superclusters, which require specialized data centers capable of handling massive power densities.

The company's operational metrics also improved: Bitcoin mined rose to 247 in March 2025 from 215 in February, while its hash rate hit 19.1 exahashes per second. Yet profitability remains elusive, with EBIT margins at -257.1% as of late 2024. Investors are betting that long-term AI contracts will eventually offset these losses.

Regulatory Tailwinds: CHIPS Act and Beyond

The U.S. CHIPS Act has been a game-changer. By incentivizing domestic semiconductor manufacturing and AI infrastructure, it aligns with Core Scientific's strategy to build HPC facilities. The act's $280 billion in funding for tech infrastructure ensures demand for data centers like Core Scientific's will remain robust.

Environmental regulations are also shaping the sector. The EU's Corporate Sustainability Reporting Directive (CSRD) now mandates transparency on energy use and carbon footprints, favoring companies like Core Scientific that invest in liquid cooling and renewable energy. For example, the firm's 12-year CoreWeave deal emphasizes energy-efficient infrastructure, which could reduce compliance risks and boost profitability over time.

The Acquisition Catalyst

Speculation that CoreWeave will acquire Core Scientific—a follow-up to its rejected 2024 bid—has driven recent volatility. If finalized, the deal would consolidate two of the sector's key players, creating a powerhouse for AI infrastructure. CoreWeave's own stock, up 350% since its March 2025 IPO, signals investor confidence in the AI space.

Risks and Challenges

Despite the positives, Core Scientific faces hurdles. Its negative EBIT margins and reliance on a single customer (CoreWeave) raise execution risks. Additionally, regulatory delays in power infrastructure—such as permitting bottlenecks highlighted in Q2 reports—could slow data center builds. Meanwhile, competitors like Equinix and Digital Realty are also expanding into AI-focused facilities, intensifying competition.

Investment Outlook

Core Scientific is a high-risk, high-reward bet. Analysts are divided: Clear Street's $20 price target reflects optimism about the CoreWeave deal, while Cantor Fitzgerald's $16 target underscores caution. The company's May 7 Q1 earnings report will be critical in assessing its path to profitability.

For now, the stock appears undervalued relative to its long-term AI infrastructure potential. However, investors should monitor two key metrics:
1. Progress on the CoreWeave acquisition, which would remove uncertainty and unlock synergies.
2. EBIT margin improvements, as rising revenue from HPC contracts could finally tip the company into positive territory.

Final Take

Core Scientific's stock surge reflects broader trends: AI is reshaping data center demand, and regulatory support is here to stay. While execution risks remain, the company's strategic pivot and partnerships position it to capitalize on a multi-decade AI infrastructure boom. For aggressive investors, a 5–10% allocation to CSTR could pay off—if the sector's challenges don't derail its progress.

Josh Nathan-Kazis is a pseudonymous tech analyst specializing in AI infrastructure and regulatory trends.