Core Scientific (CORZ): A Data Center Play for the AI Era – Is the Rally Just Getting Started?

The recent 35% surge in Core Scientific's (CORZ) stock price has investors buzzing about whether this rally is just the beginning. At the heart of the excitement is the ongoing acquisition talks with CoreWeave (CRWV), which—if finalized—could transform Core Scientific from a cryptocurrency mining relic into a cornerstone of the AI infrastructure boom. Let's dissect the strategic and financial dynamics driving this opportunity, while weighing the risks that could derail it.

The Acquisition Catalyst: A Tale of Two Companies

The Wall Street Journal reported that CoreWeave is in advanced talks to acquire Core Scientific, with a potential deal valued at over $30 per share—nearly double Core Scientific's current price of $16.36. This contrasts sharply with CoreWeave's rejected 2024 bid of $5.75 per share, which Core Scientific dismissed as laughably low.

The renewed interest stems from Core Scientific's strategic pivot from Bitcoin mining to AI colocation services, a shift that has vaulted its market cap to nearly $5 billion. CoreWeave, meanwhile, is racing to secure control of high-performance computing (HPC) infrastructure to fuel its AI ambitions. A merger would allow CoreWeave to own the data centers it leases from Core Scientific, slashing costs and securing critical HPC capacity.

The Financial Foundation: $10.2 Billion in Contracts, and Counting

Core Scientific's valuation isn't just hype. The company has a 12-year partnership with CoreWeave, including a $1.2 billion revenue boost, bringing total contracted revenue to $10.2 billion. This includes 590 megawatts (MW) of infrastructure across six sites, with 200 MW already operational and another 390 MW slated for completion by early 2026.

Analysts at Cantor Fitzgerald have validated this value:
- Infrastructure replacement cost: $11.70 per share (based on 570 MW of power infrastructure).
- CoreWeave lease valuation: $24 per share (using a 15x multiple for data center REITs).
Combined, this implies a $35.70 per share valuation, far above current levels.

Synergies and Strategic Rationale

The deal's logic is clear:
1. Cost Control: CoreWeave's $25.9 billion backlog of AI contracts (including a landmark $11.9B deal with OpenAI) requires HPC infrastructure. Owning Core Scientific's data centers would eliminate lease expenses and reduce operational risk.
2. Scalability: Core Scientific's 590 MW capacity positions it to support the exponential growth of AI workloads, which demand 10x more computing power than traditional data centers.
3. Sector Leadership: Merging with CoreWeave would create a vertically integrated AI infrastructure powerhouse, rivaling hyperscalers like Amazon and Google.

The Risks: Debt, Execution, and Valuation Overhang

While the upside is compelling, risks loom large:
- CoreWeave's Financials: The company reported a $315M net loss in Q1 2025, up 144% year-over-year, and carries $8.7 billion in debt. While its “self-amortizing” debt structure (repaid via project revenue) provides some comfort, the acquisition could strain its balance sheet further.
- Deal Uncertainty: No agreement is final. If talks collapse, Core Scientific's stock could plummet, as happened in 2024 when its shares fell 30% after rejecting the initial bid.
- Sector Volatility: The AI infrastructure sector is booming, but competition is fierce. Rivals like Equinix and Digital Realty are also expanding HPC capacity, and Core Scientific's repurposed mining facilities may struggle to match purpose-built data centers.

Investment Thesis: Buy the Dip, But Watch the Debt

Core Scientific's analyst consensus of “Strong Buy” with a $24 price target (implying 50% upside) reflects the bullish case. Key catalysts ahead:
1. Deal Finalization: A definitive agreement would likely lift shares to $30+, aligning with Cantor's $35.70 valuation.
2. Infrastructure Deliverables: Hitting milestones in the 590 MW rollout (e.g., 200 MW operational now, 390 MW by 2026) will validate Core Scientific's execution.
3. CoreWeave's Financial Health: Monitor CoreWeave's debt management and revenue growth (up 420% YoY in Q1 2025).

The Bottom Line

Core Scientific's rally has legs—if the CoreWeave deal closes. The $10.2 billion revenue stream and strategic HPC infrastructure position it to thrive in the AI era. However, investors must remain cautious until the deal is confirmed and CoreWeave demonstrates it can manage its debt while scaling operations.

For aggressive investors: Use dips below $15 to accumulate, targeting $24-$30 on deal closure.
For the cautious: Wait for a definitive agreement before committing, as execution risk remains high.

In the AI gold rush, Core Scientific is either a diamond in the rough—or a fool's errand. The next few weeks will decide.

This analysis is for informational purposes only. Always conduct your own research and consult a financial advisor before making investment decisions.