The $9 billion all-stock acquisition of data center operator Core Scientific by AI cloud computing firm CoreWeave triggered an unexpected market backlash, with both companies experiencing significant share price declines. Since the July 7 announcement, Core Scientific shares have tumbled 25%, briefly halting a five-day losing streak on Monday while seeing its market capitalization shrink to $6 billion—$1.2 billion below the stock value offered by CoreWeave. More strikingly, acquirer CoreWeave concurrently plunged 20%, erasing over $12 billion in market value.

This adverse reaction underscores deepening investor skepticism toward AI sector valuations. Core Scientific shareholders appear to distrust CoreWeave stock as payment currency, questioning whether the $64 billion-valued AI firm—commanding 13 times sales while remaining unprofitable—can sustain its premium. The unusual market response exposes inflated valuations within the AI frenzy and signals potential vulnerability in the record-breaking equity rally.

Typically, shareholders embrace premium acquisition offers, yet Core Scientific's current $6 billion valuation sits 21% below the deal price. Pre-negotiation rumors from June 26 had placed Core Scientific near $12 per share, but the acquisition initially valued it at approximately $20. This widening gap suggests shareholders view independence as preferable to accepting CoreWeave equity—particularly given CoreWeave's concerning revenue concentration, with Microsoft generating 72% of last quarter's income.

The "tenant-buys-landlord" dynamic—where CoreWeave leases infrastructure from Core Scientific under a $10 billion, 12-year commitment—backfired spectacularly, deflating both companies' valuation bubbles instead of creating synergies.

Compounding concerns, CoreWeave's scarce float amplified its earlier surge. After March's $40 IPO, shares skyrocketed over 300% to $187 by June, fueled by just 47 million publicly traded shares (13% of total). This scarcity created buying bottlenecks and made shorting prohibitively expensive. Core Scientific shareholders circumvented this by directly dumping shares rather than shorting CoreWeave.

A September 24 lockup expiry looms as another pressure point, freeing insiders and early investors to sell roughly 290 million shares—a potential overhang that could further depress CoreWeave's stock before deal closure.

The transaction's widening valuation gap signals possible collapse and reflects broader AI sector anxieties. CoreWeave's pursuit of a deal rejected by Core Scientific shareholders now jeopardizes its own market standing—an unwise outcome for a company riding the AI wave.