Why CoreWeave and Core Scientific Are Better Apart Than Together

The $9 billion all-stock acquisition of Core Scientific by CoreWeave has been hailed as a bold move to vertically integrate AI infrastructure. Yet, beneath the surface of this high-profile deal lies a web of strategic and financial overreach that raises critical questions about long-term value creation. While the transaction aims to future-proof CoreWeave's growth by securing power and data center assets, the risks of valuation distortion, equity dilution, and operational redundancy suggest that the combined entity may struggle to justify the costs of integration.

Valuation Distortion: A House of Cards Built on Optimism

CoreWeave's post-IPO valuation surge—up 180% year-to-date by July 2025—created a fertile ground for aggressive dealmaking. However, this optimism was fueled by speculative momentum rather than sustainable fundamentals. The company's stock price peaked at $90.24 in July 2025, a stark contrast to its $40 IPO price, yet this trajectory was punctuated by a 20% drop following Q2 earnings that revealed a wider-than-expected loss of 27 cents per share.

The $9 billion valuation for Core Scientific was based on a fixed exchange ratio of 0.1235 CoreWeave shares per Core Scientific share, calculated using CoreWeave's 5-day VWAP of $20.40 as of July 3, 2025. This implied a 66% premium to Core Scientific's unaffected share price of $12.30. However, CoreWeave's stock volatility—exacerbated by a $3 billion–$3.35 billion capital expenditure plan and a $267 million interest expense in Q2 2025—casts doubt on the stability of this valuation. If CoreWeave's stock corrects further, Core Scientific shareholders could end up owning a stake worth significantly less than the premium they were promised.

Equity Dilution: A Silent Erosion of Shareholder Value

The all-stock structure of the deal means CoreWeave is issuing 0.1235 shares for every Core Scientific share, effectively diluting existing shareholders. With Core Scientific shareholders set to own less than 10% of the combined entity, the transaction prioritizes short-term strategic control over long-term equity preservation. This dilution is particularly concerning given CoreWeave's already leveraged balance sheet, which includes a $25.9 billion revenue backlog and a $11.2 billion contract with OpenAI.

Critics, including Core Scientific's largest shareholder Two Seas Capital, argue the deal “materially undervalues” Core Scientific and exposes its shareholders to “substantial economic risk.” The market's initial 3% drop in CoreWeave's stock post-announcement underscores investor skepticism about whether the dilution is justified by the strategic benefits.

Strategic Redundancy: The Cost of Overambitious Vertical Integration

At first glance, the acquisition appears to eliminate $10 billion in cumulative lease overhead over 12 years and secure 1.3 gigawatts of power capacity. However, the operational overlap between Core Scientific's crypto mining assets and CoreWeave's AI/HPC focus creates a paradox. Core Scientific's data centers are currently optimized for high-density cryptocurrency workloads, which require different cooling, power, and computational configurations than AI training.

Repurposing these sites will take time, resources, and capital, with no guarantee of immediate returns. The projected $500 million in annual cost savings by 2027 hinges on a seamless transition, yet the short-term risk of underutilized infrastructure and redundant operations looms large.

The Bigger Picture: A Cautionary Tale for AI Infrastructure Investors

The CoreWeave-Cores Scientific deal epitomizes the allure and pitfalls of high-growth tech acquisitions. While vertical integration can reduce costs and secure critical assets, the execution risks—valuation overreach, dilution, and operational misalignment—often outweigh the benefits. For investors, the key takeaway is to scrutinize not just the strategic narrative but the financial mechanics of such deals.

Investment Advice:
1. Monitor CoreWeave's Capital Deployment: Watch for signs of overleveraging or delayed infrastructure projects, which could delay revenue recognition.
2. Assess Integration Progress: Track the efficiency of repurposing Core Scientific's data centers and the timeline for achieving $500 million in annual savings.
3. Evaluate Shareholder Sentiment: The lock-up expiration in late July 2025 and subsequent selling pressure could further test CoreWeave's stock resilience.

In the end, the question remains: Is the combined entity a fortress of AI infrastructure, or a fragile amalgamation of mismatched assets? For now, the answer leans toward the latter. Investors would be wise to proceed with caution, recognizing that in the high-stakes world of AI infrastructure, even the most ambitious strategies can falter under the weight of their own ambition.