By Adam Clark

CoreWeave faces a struggle to acquire Core Scientific. Volatile share moves are putting the deal at risk but both companies would be best served to reach an agreement.

CoreWeave struck an all-stock deal for its infrastructure partner Core Scientific in July in a deal worth $9 billion at the time. It looked like a clever way of using the artificial-intelligence cloud company's highly valued stock to own more computing infrastructure without piling on debt, which would be risky for a company that has already borrowed heavily.

However, the all-stock structure of the deal left it vulnerable to a downward move in CoreWeave's shares, lowering the nominal value of the acquisition. And that's exactly what happened, with CoreWeave's shares having lost around 44% since their July peak, following the company's earnings report and the expiration of the lockup for insiders following its initial public offering.

At a fixed ratio of 0.1235 CoreWeave shares for every Core Scientific share, the implied value of the deal was $20.40 at the time of its announcement. However, that had fallen to $12.77 at Friday's closing price of $103.40 for CoreWeave stock.

Understandably, the acquisition has become controversial. Two Seas Capital -- an alternative investment firm holding around 6.3% of Core Scientific -- has publicly said it intends to oppose the deal unless the terms are revised.

Traders look to be betting that CoreWeave will be forced to up its bid. Shares in Core Scientific closed at $14.35 on Friday.

A renegotiation seems likely. Although few Wall Street analysts cover Core Scientific, those who do have pegged its stand-alone value at considerably higher than the current implied price, based on its ability to convert its cryptocurrency mining infrastructure to AI computing power.

Jefferies analyst Jonathan Peterson put Core Scientific's potential acquisition value at between $16 and $23 a share. He noted that an exchange ratio of between 0.16 and 0.20 CoreWeave shares for each Core Scientific share would be required to hit even the low end of the valuation range.

"A renegotiation of the acquisition is possible, if necessary. We would expect a higher exchange rate, with a collar to prevent the implied Core Scientific price from slipping past its fair value," wrote Petersen in a research note.

CoreWeave declined to comment on the prospects of a renegotiation. Core Scientific didn't respond to a request for comment.

CoreWeave might look to play hardball in negotiations. Core Scientific said in a filing pertaining to the merger that if it were to continue as a stand-alone business, it would likely need significant capital expenditure starting in the second half of this year and there was no guarantee it could obtain the required financing. It also noted that CoreWeave CEO Michael Intrator had rejected changing the structure of the acquisition to a fixed-value deal or including cash, and that no other potential acquirer had emerged.

Together, that might give CoreWeave confidence to stand its ground -- especially if its own share price benefits from increasing availability of Nvidia's newest GB300 AI servers in the second half of the year.

Still, Core Scientific has its own cards to play. It can point to other crypto miners being rewarded in the stock market for their conversion to AI computing providers.

IREN stock surged on Friday after the company announced another round of Nvidia chip purchases and said it expected its annualized AI cloud revenue to grow tenfold by the end of the year. TeraWulf shares have nearly doubled in the past month, largely due to Google-parent Alphabet taking a stake in the company as part of an AI-hosting deal.

Ultimately a deal would be by far the best outcome for both sides. Power is increasingly in demand for AI computing and acquiring Core Scientific would add around 1.3 gigawatts of gross power capacity to CoreWeave's data-center portfolio, with a potential one gigawatt of power available for expansion. CoreWeave has estimated it will result in $500 million in annual cost savings and the removal of $10 billion in lease overheads.

Cantor analyst Thomas Blakey initiated coverage on CoreWeave stock with an Overweight rating and $116 target price last week, but suggested that overcoming the bottleneck of access to power should be a priority for the company.

"We view the closing of the proposed Core Scientific transaction and the potential conversion of bitcoin-related valuable power to HPC [high-performance computing] as [a] near term catalyst for CoreWeave shares," wrote Blakey.

Meanwhile, Core Scientific would face a risky future if its relationship with CoreWeave -- its main customer -- sours and it has to engage in a hasty effort to raise funds.

It shouldn't need an AI supercomputer to conclude a recut deal is likely the best solution.

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

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September 01, 2025 11:12 ET (15:12 GMT)

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