By Adam Clark

CoreWeave's shine has worn off since it was briefly the hottest artificial-intelligence play on the market earlier this summer. However, good news from its peer Nebius Group could ease the pain and even rescue a planned acquisition.

CoreWeave stock has fallen by roughly a third since its June peak when the AI cloud company became a darling of retail traders looking for the next hot name.

Its hefty valuation has raised eyebrows among analysts, considering its significant debt load and reliance on Microsoft as its major customer. The valuation came under the microscope when CoreWeave struck a deal to acquire its data-center infrastructure partner Core Scientific last month.

The all-stock formula of the deal meant that the price was dependent on CoreWeave's share performance before the transaction closed in the fourth quarter. At the time it was announced, the ratio of 0.1235 newly issued shares of CoreWeave for each share of Core Scientific implied a total equity value of $9.0 billion, or $20.40 per share, for Core Scientific.

Since then, CoreWeave's shares have dropped by about 25% through Wednesday's close. Core Scientific shares closed Wednesday at $14.60. That suggests investors have little optimism CoreWeave's price will return to its previous levels -- many are likely eyeing the expiration of its initial public offering lockup at the close of trading on Aug. 14, which will allow insiders and early investors to sell stock.

Unsurprisingly, not all Core Scientific shareholders are happy. Two Seas Capital -- an alternative investment firm holding around 6.3% of Core Scientific -- went public on Thursday, with an open letter saying it would oppose the deal unless the terms were revised.

"In our view, the transaction decidedly and unfairly favors CoreWeave at the expense of Core Scientific shareholders. The fact that Core Scientific's stock price declined by 30% in the days following the transaction announcement strongly suggests to us that other investors agree," Two Seas Capital wrote.

CoreWeave declined to comment on the open letter.

So are CoreWeave's hopes sunk? Maybe not, if it can rekindle investor enthusiasm for its own shares. That's where fellow AI infrastructure provider Nebius comes in -- its stock has surged around 30% on the back of its earnings report on Thursday, as its quarterly revenue grew more than sevenfold from the same period the previous year.

CoreWeave stock was gaining in sympathy, rising 7.1% to $129.54 in early trading on Friday. The stock has now bounced substantially from lows of around $100 at the end of July. If the rally keeps going, the deal with Core Scientific looks much more likely to go ahead.

One word of caution is that Nebius is growing from a much smaller base than CoreWeave. Nebius -- which was spun out from the breakup of Russian tech company Yandex -- reported quarterly revenue of $105.1 million. CoreWeave is expected to report revenue of $1.08 billion in its own earnings report next Tuesday.

Write to Adam Clark at adam.clark@barrons.com

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August 11, 2025 10:12 ET (14:12 GMT)

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