Why Core Scientific Shareholders Are Right to Reject the CoreWeave Merger and What It Means for AI Infrastructure Investing

The proposed $9 billion all-stock merger between CoreWeave and Core Scientific has ignited a firestorm of controversy, particularly among Core Scientific shareholders who argue the deal is a risky bet on an overvalued asset. At first glance, the transaction appears to offer a strategic win for CoreWeave, which aims to consolidate its position in the AI infrastructure sector by acquiring Core Scientific’s data center footprint and operational expertise. However, a closer examination of the valuation mechanics, industry dynamics, and shareholder alignment reveals a far more precarious proposition.

Merger Valuation Risk: A Tale of Two Stock Prices

The core issue lies in the structure of the deal: Core Scientific shareholders will receive 0.1235 newly issued shares of CoreWeave Class A common stock for each share of Core Scientific stock. This all-stock arrangement, while common in high-growth sectors, exposes Core Scientific shareholders to the volatility of CoreWeave’s stock price. According to a report by Inside Arbitrage, the implied per-share value of Core Scientific was initially $20.40 in July 2025, based on CoreWeave’s stock price at the time of the announcement [1]. However, CoreWeave’s stock has since declined by nearly 26%, reducing the effective value of the merger consideration to $11–$12 per share [4]. This 46% drop in valuation—without any material change in Core Scientific’s fundamentals—highlights the fragility of an all-stock deal in a sector prone to rapid price swings.

Two Seas Capital, a major Core Scientific shareholder, has been vocal in its opposition, arguing that the merger “materially undervalues the Company and unnecessarily exposes its shareholders to substantial economic risk” [2]. The firm has even proposed a “collar” agreement to cap downside risk, a move that would provide valuation certainty in a market where CoreWeave’s stock could continue to fluctuate. Without such safeguards, Core Scientific shareholders are essentially betting that CoreWeave’s stock will rebound—a gamble that may not align with their long-term interests.

Industry Context: High Multiples, Higher Risks

The AI data center sector has been a poster child for speculative growth in 2025, with acquisition multiples for data center platforms averaging 25x to 30x over the past four years [3]. CoreWeave itself trades at a price-to-sales (P/S) ratio of 25, significantly higher than the U.S. technology sector’s average of 8.4 [4]. While this premium reflects investor enthusiasm for AI infrastructure, it also raises questions about sustainability. If CoreWeave’s growth slows or its margins fail to meet expectations, the stock could face further downward pressure, compounding the risks for Core Scientific shareholders.

Moreover, the sector’s rapid expansion is not without structural challenges. Rising energy costs, regulatory scrutiny over data localization, and the capital-intensive nature of data center development all pose headwinds. For instance, Core Scientific’s own history—emerging from Chapter 11 bankruptcy in 2024 and grappling with declining cryptocurrency markets—underscores the financial instability that can plague even seasoned players in this space [2]. Merging with a company like CoreWeave, which is itself burning through cash to scale its infrastructure, may not address these underlying risks but instead amplify them.

Strategic Risks: Patents, Profitability, and Power

Beyond valuation concerns, the merger’s strategic logic is also under scrutiny. Core Scientific’s patent portfolio, which includes thermal management and environmental monitoring technologies, is a key asset in the deal. However, as noted by Parola Analytics, most of these patents were filed before 2021 and have not been updated since 2022 [2]. In a sector defined by rapid innovation, the relevance of these intellectual property assets is questionable. Meanwhile, CoreWeave’s projected $500 million in annual cost savings by 2027 hinges on successful vertical integration—a complex and uncertain process [5].

The merger also raises questions about CoreWeave’s ability to manage its expanding power capacity. While the deal adds 1.3 gigawatts of gross power capacity, the company’s current leverage and operational efficiency remain unproven. As The Globe and Mail points out, CoreWeave’s aggressive expansion has already led to a 24% stock price decline in 2025 [4]. If the merged entity fails to deliver on its cost-saving promises, the market may punish shareholders further.

Implications for AI Infrastructure Investing

The CoreWeave-Core Scientific merger serves as a cautionary tale for investors in the AI infrastructure sector. While the allure of high-growth assets is strong, the risks of overpaying in all-stock deals and relying on speculative valuations cannot be ignored. For Core Scientific shareholders, rejecting the merger is not just about preserving value—it’s about demanding accountability in a market where hype often outpaces fundamentals.

For broader AI infrastructure investing, the deal highlights the importance of balancing strategic ambition with financial prudence. Investors should prioritize companies with proven operational efficiency, diversified revenue streams, and defensible margins. In a sector where regulatory scrutiny and capital demands are rising, sustainability—not scale—will be the key to long-term success.

Conclusion

The CoreWeave-Core Scientific merger is a high-stakes gamble cloaked in the language of strategic synergy. While CoreWeave’s management may benefit from immediate gains, the structure of the deal leaves Core Scientific shareholders exposed to a volatile stock and uncertain future. As Two Seas Capital and other skeptics argue, the time to act is now—before further declines in CoreWeave’s stock erode what little value remains. For the AI infrastructure sector, this case underscores a broader lesson: in the race to build the next-generation data centers, valuation discipline and shareholder alignment must not be sacrificed at the altar of growth.

**Source:[1] CoreWeave to Acquire Core Scientific [https://www.coreweave.com/news/coreweave-to-acquire-core-scientific][2] Core Scientific patents and its $9 billion CoreWeave deal [https://parolaanalytics.com/blog/core-scientific-patents-coreweave-deal/][3] Data Center Investment: Decoding Opportunities [https://www.cbreim.com/insights/articles/decoding-data-centers][4] Down 24%, Should You Buy the Dip on CoreWeave? [https://www.theglobeandmail.com/investing/markets/markets-news/Motley%20Fool/33490969/down-24-should-you-buy-the-dip-on-coreweave/][5] July 2025 Software & Technology Transactions Report [https://www.dakota.com/reports-blog/july-2025-software-technology-transactions-report]