Core Scientific's AI Infrastructure Play Fuels Buyout Buzz and 33% Stock Surge

The recent 33% surge in Core Scientific's (CORZ) stock price—driven by renewed buyout talks with CoreWeave—highlights a pivotal moment in the data center sector's shift toward artificial intelligence (AI) infrastructure. As negotiations advance, investors are pricing in a potential premium that reflects Core Scientific's strategic transformation from a Bitcoin mining relic to a critical player in the $185 billion AI infrastructure market. This article dissects the deal's rationale, its implications for the sector, and what it means for investors.

The Strategic Rationale: Why CoreWeave Wants Core Scientific

CoreWeave, a leading AI cloud infrastructure provider, is reportedly in advanced talks to acquire Core Scientific for a potential premium of 50–80% over current levels. The deal makes sense for two key reasons:

1. Vertical Integration of Infrastructure: CoreWeave currently leases 590 MW of data center capacity from Core Scientific under a $3.5 billion, 12-year agreement. By acquiring the infrastructure outright, CoreWeave could eliminate $850 million in annual lease payments and avoid future obligations totaling $15 billion over the contract's lifespan. This would free up capital to invest in GPU upgrades and AI tooling (e.g., its recent acquisition of Weights & Biases for $1.7 billion).

2. Access to Scalable HPC Capacity: Core Scientific's 724 MW of contracted power—40% now dedicated to high-performance computing (HPC)—positions it as a critical asset in the AI infrastructure race. NVIDIA's A100/H100 GPUs, used by both companies, ensure seamless integration of workloads. With global GPU shortages and data-center bottlenecks, owning this infrastructure becomes a strategic necessity for CoreWeave's AI cloud expansion.

Sector Consolidation: A $57 Billion Trend in Data Centers

The Core Scientific-CoreWeave deal isn't an isolated event. The data center sector saw record M&A activity in 2024, with $57 billion in closed deals, driven by AI's insatiable demand for compute power. Private equity firms like Blackstone and H.I.G. Capital have been aggressive buyers, accounting for 80–90% of M&A value since 2021. Core Scientific's pivot from Bitcoin mining to AI hosting mirrors this trend, as firms repurpose underutilized infrastructure to capitalize on AI's growth.

Core Scientific's Financial Turnaround and Valuation

Core Scientific's Q1 2025 results underscore its strategic shift:
- Net Income: $580 million (up 176% year-over-year), fueled by HPC hosting contracts.
- Revenue: $79.5 million (down 56% Y/Y), reflecting a shift from volatile Bitcoin mining to predictable HPC revenue streams.
- Valuation: A market cap of $5 billion now versus $1 billion in 2024, despite declining Bitcoin revenue.

The company's HPC business generates $290 million annually, with 977 BTC ($30 million) as a secondary revenue source. Analysts project a 12-month price target of $20–$25 per share, implying a 50% upside from current levels.

Risks and Challenges

• Antitrust Scrutiny: The combined entity could command 20% of North America's HPC market, raising regulatory red flags.
• Debt Overhang: CoreWeave's $8 billion debt load could complicate financing, though an all-stock deal is likely.
• Operational Risks: Core Scientific's 2022 bankruptcy and reliance on a single client (CoreWeave for 60% of revenue) pose execution risks.

Investment Outlook: Trade the Momentum or Hold for the AI Play?

• Short-Term Traders: The stock's next resistance is $18.60. Breakout buyers could target $20–$25 if the deal terms are favorable.
• Long-Term Investors: Core Scientific trades at a 40% discount to sector peers (e.g., CyrusOne) despite its scale advantage. Its HPC contracts and 12-year revenue visibility make it a “growth machine” even without the acquisition.

Analysts recommend a Strong Buy rating, citing the AI infrastructure tailwind and CoreWeave's strategic need for vertical integration. While risks exist, the sector's consolidation trend and Core Scientific's unique HPC assets make it a compelling play on the AI boom.

Conclusion: A Strategic Crossroads for Data Centers

The Core Scientific-CoreWeave deal encapsulates the data center sector's evolution: from crypto mining relics to AI infrastructure leaders. With global AI compute demand projected to grow exponentially, owning scalable HPC capacity—like Core Scientific's—is a non-negotiable advantage. Investors bullish on AI's long-term potential should consider Core Scientific as a leveraged play on this megatrend, even as they monitor regulatory and execution risks. For now, the stock's surge signals markets are pricing in a win-win for both companies—and their investors.