Core Scientific (CORZ): Riding the AI Compute Wave to Valuation Gold

The stock of Core Scientific (CORZ) has surged over 200% year-to-date, fueled by its pivot from cryptocurrency mining to AI infrastructure. This strategic repositioning has positioned the company at the epicenter of the AI compute boom, where rising demand for high-performance data centers is driving a valuation re-rating. Let's dissect why CORZ is primed to capitalize on this secular trend—and why investors should consider buying now.

The AI Infrastructure Play: Data Centers as the New Oil

Core Scientific's transformation from a Bitcoin miner to an AI colocation provider is now paying dividends. The company's Q2 2025 progress—delivering 8MW of billable capacity to CoreWeave by May 2025 and an additional ~40MW by the end of the quarter—marks a critical step toward its 250MW target by year-end. This expansion aligns with its $10.2 billion revenue commitment under a 12-year partnership with CoreWeave, a leading AI infrastructure firm.

The company's shift to high-margin colocation services is already reshaping its financials. While Q1 2025 revenue fell 55% to $79.5 million due to Bitcoin's post-halving slump, colocation revenue hit $8.6 million—up from $0 in the prior year. Crucially, non-GAAP colocation gross margins reached 8%, excluding power pass-through costs, signaling operational leverage as utilization scales.

Client Contracts Fueling Long-Term Growth

Core Scientific's partnerships with AI heavyweights like CoreWeave and OpenAI (via CoreWeave's $11.9 billion deal with OpenAI) underscore its strategic advantage. The 590MW capacity target by 2027 positions the firm to capture demand from enterprises racing to deploy AI models. Analysts estimate that global AI compute spending could hit $150 billion annually by 2030, with data center operators like CORZ benefiting from recurring revenue models.

Margin Improvements: Scaling Up, Scaling Out

The company's path to profitability hinges on utilization rates. While Q2 2025 utilization data isn't explicitly disclosed, the delivery of 48MW by June 2025 suggests a rapid ramp-up. Analysts project that achieving 80%+ utilization across its 250MW capacity by 2026 could push colocation revenue to $360 million annually, with margins expanding to 15-20% as fixed costs are absorbed. This compares favorably to Q1's 5% gross margin, which included pass-through costs.

Valuation: A Discounted Play on AI Compute Demand

Despite the stock's recent rally, CORZ trades at a 30.4x EBITDA multiple, below peers like Equinix (EQIX) at ~35x. This discount reflects execution risks, including tariff-driven cost pressures and Bitcoin's volatility. However, Core Scientific's $778.6 million cash balance provides a buffer, while its $5 billion market cap remains small enough to see outsized gains from incremental revenue.

Risks and Mitigants

• Execution Risk: Delays in data center builds or client contracts could stall momentum.
• Regulatory Overhang: Proposed energy tax policies could raise operating costs.
• Bitcoin Volatility: While colocation now drives growth, self-mining revenue remains exposed to crypto cycles.

Mitigants include CoreWeave's multi-year commitments, which lock in revenue visibility, and Core Scientific's focus on low-cost power regions (e.g., Texas) to offset inflation.

Investment Thesis: Buy the Dip, Target $12+ by Year-End

Core Scientific is a buy at current levels, with a 12-month price target of $12 (30% upside from $9.20). Analysts project $0.73 EPS by 2025, suggesting the stock is still undervalued relative to its growth trajectory. Investors should use dips below $8.50 to accumulate, with risks hedged by the company's liquidity and partnership strength.

In a world where AI compute is the new oil, Core Scientific's infrastructure is the refinery. With utilization rates climbing and contracts secured, this stock is set to deliver outsized returns as the AI boom accelerates.

Final Note: Monitor Q2 2025 utilization metrics and CoreWeave's capacity ramp in the coming quarters for confirmation of this bullish case.