Why CoreWeave's $9 Billion Deal Isn't About Chips

CoreWeave, Inc. CRWV, an AI cloud-computing startup specializing in AI infrastructure, announced on July 7 its intent to acquire crypto miner Core Scientific, Inc. CORZ in a $9 billion all-stock deal.

This acquisition is expected to enable CoreWeave to verticalize its data center footprint, aiming to “future-proof revenue growth” and enhance profitability.

Following the announcement, Bank of America Securities analyst Brad Sills maintained a Neutral rating on CoreWeave on Tuesday, setting a price forecast of $185.

Also Read: CoreWeave Surges As Microsoft, OpenAI Deals Fuel Revenue Spike, Wall Street Boost

As per the terms of the fixed exchange ratio, Core Scientific stockholders will receive 0.1235 newly issued shares of CoreWeave Class A common stock for each share of Core Scientific common stock they hold.

Sills noted that the $9 billion equity value is calculated on a fully diluted basis, based on CoreWeave’s 5-day volume-weighted average price (VWAP) of $20.40 per share.

Sills highlighted that Core Scientific operates large-scale, energy-efficient data centers optimized for high-density workloads, including bitcoin mining and AI.

Bitcoin mining companies are expanding their operations beyond cryptocurrency by leveraging their existing power and data center infrastructure for AI workloads.

They are now leasing out their power capacity and data center space to meet the surging demand from the AI sector. This strategic shift is exemplified by recent acquisitions within the industry.

The analyst emphasized that this proposed acquisition primarily focuses on securing greater access to power rather than acquiring GPUs or CPUs.

Core Scientific’s property, plant, and equipment base, valued at $650 million as of March, is notably small compared to Sills’ estimated $21.5 billion in capital expenditures for CoreWeave in fiscal year 2025.

The acquisition provides CoreWeave access to 10 data centers across the U.S. with a total contracted power capacity of 1.3 gigawatts (GW). Of this, approximately 840 megawatts (MW) are already modified for high-performance computing (HPC), with the remaining 500 MW currently supporting bitcoin operations, according to Sills.

He observed a 60% overlap with CoreWeave’s existing data center locations and 40% from newly added geographies. This diversification will grant CoreWeave access to power in new regions such as Kentucky, Oklahoma, and North Dakota, as per Core Scientific’s recent filing.

Furthermore, CoreWeave anticipates $500 million in operating expense synergies by calendar year 2027. These savings are expected to stem from the elimination of long-term operating leases (totaling $10 billion over 12 years) and a streamlined operational focus.

Sills projects that this would raise the combined entity’s adjusted operating margin to 28.4%, up from his current estimate of 26.0% for CoreWeave alone. However, Sills cautioned that achieving these synergies carries execution risk, noting that the market is already modeling an aggressive margin ramp for Core Scientific standalone in fiscal 2027, from 8.0% in Q1 2025 to 22.2%, according to Bloomberg.

Price Action: CoreWeave stock traded lower by 3.75% to $153.71, while Core Scientific stock was down 3.07% at $14.38 at last check Tuesday.

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