CoreWeave is going to buy Core Scientific for $9 billion to meet the power needs of AI
On Monday, CoreWeave (CRWV.O) announced that it would purchase cryptocurrency miner Core Scientific (CORZ.O) in an all-stock transaction worth around $9 billion. This comes as AI infrastructure companies compete to acquire the energy and data center capacity required to meet the soaring demand.
During the cryptocurrency boom, energy-intensive websites and power contracts used by Bitcoin miners became great targets for AI businesses looking to increase their processing infrastructure.
More than $10 billion in future lease overhead that must be paid for current contractual sites over the next 12 years would be immediately eliminated thanks to the transaction, according to CoreWeave.
The offer places Core Scientific at $20.40 per share, which is almost 66% more than the stock’s closing price prior to rumors of acquisition negotiations circulating in late June.
In morning trading, Core Scientific’s stock dropped 22%, while Nvidia (NVDA.O), which recently launched a new tab-backed CoreWeave, saw a 4.5% decline.
Each share of freshly issued CoreWeave stock will be worth 0.1235 to Core Scientific stockholders.
“This acquisition accelerates our strategy to deploy AI and HPC (high-performance computing) workloads at scale,” Mike Intrator, CEO of CoreWeave, stated.
The ultimate price will be decided at the end of the fourth quarter, when the deal is anticipated to finalize.
A PIVOT GATHERING AREA
In order to diversify beyond cryptocurrency, bitcoin miners have taken advantage of the AI explosion. They have leased data center space and electricity to accommodate the increasing demand from AI workloads.
Bernstein analyst Gautam Chhugani told Reuters that the acquisition is expected to raise the bar for bitcoin miners who want to switch to AI, but that power is still the largest barrier to the growth of AI data centers.
“CoreWeave gets full control of Core Scientific’s entire 1.3 GW power contracted and future pipeline,” stated Chhugani.
CoreWeave was established in 2017 as a cryptocurrency miner specializing in Ethereum, but a few years later it switched to AI. After “The Merge,” Ethereum’s 2022 update, reduced miner incentives, it shut down its mining operations.
CoreWeave’s IPO prospectus states that the company’s revenue has increased at a dizzying rate, more than doubling in the past year.
Additionally, Core Scientific, which declared bankruptcy in late 2022 due to a precipitous decline in bitcoin prices and skyrocketing energy expenses, has made a comeback with the transaction.
Early in 2024, the business came out of bankruptcy, and like a number of other bitcoin miners, it has looked to the AI boom to fuel its expansion.
CoreWeave initially made an unsolicited, non-binding buyout bid to Core Scientific in June 2024. The business said the offer was much undervalued at the time and turned it down.
Later, a number of 12-year contracts were negotiated between the two businesses, one of which called for Core Scientific to supply CoreWeave with roughly 200 MW of infrastructure to support its high-performance computing services.
As to LSEG data, CoreWeave, which offers access to data centers and AI chips powered by Nvidia, is valued at over $79 billion.
CoreWeave’s financial counsel is Goldman Sachs, while Core Scientific’s is Moelis and PJT Partners.
