Core Scientific's AI Pivot Boosts Valuation to $30 per Share

Core Scientific, a prominent bitcoin miner, is poised for a significant valuation boost, potentially reaching over $30 per share, according to a recent report by Cantor Fitzgerald. The report highlights the strategic importance of Core Scientific's role in powering AI infrastructure, which is driving its increased value. The potential acquisition by CoreWeave, a cloud AI compute firm, is seen as a pivotal moment for the company, given the long-term cash flows from its AI contracts and the substantial value of its data centers.

Cantor Fitzgerald's analysis suggests that Core Scientific's current market valuation does not fully reflect its potential. The firm values the 12-year, $3.5 billion infrastructure lease signed with CoreWeave at $24 per share, using a conservative profit multiple typical for traditional data center REITs. Additionally, the replacement value of Core Scientific's 570MW of power infrastructure is estimated at $11.70 per share, further bolstering the company's upside potential.

The shift from bitcoin mining to AI infrastructure is seen as a more profitable venture, though not all companies have successfully made this transition. Rittenhouse Research, a fintech and AI-focused firm, argues that the most successful crypto companies are pivoting to become AI infrastructure providers. This shift is driven by the belief that AI generates stable, long-term cash flows, unlike bitcoin mining, which is subject to sharp revenue drops due to halvings and volatile price cycles.

However, not all pivots away from bitcoin mining have been successful. For instance, Bit Digital's move to Ethereum staking resulted in a 15% drop in its stock price, and Canaan's attempt to diversify into AI hardware ended with the shutdown of its chip unit and a significant decline in its stock value. Core Scientific, on the other hand, appears to have found a successful middle ground by leveraging its mining-built footprint to tap into the growing AI infrastructure market.

If Cantor Fitzgerald's thesis proves correct, CoreWeave's potential acquisition of Core Scientific could set a new blueprint for the sector. The deal would not only validate Core Scientific's strategic pivot but also highlight the growing importance of AI infrastructure in the tech industry. Neither CoreWeave nor Core Scientific has publicly commented on the matter, but the potential acquisition has already sent Core Scientific's shares surging, indicating market optimism about the deal's prospects.