Core Scientific: From Bitcoin Miner to AI Powerhouse?

Core Scientific: From Bitcoin Miner to AI Powerhouse?

Core Scientific (CORZ) is potentially on the verge of a major transformation, and investors are taking notice. A recent research note from Cantor Fitzgerald suggests the company could be worth over $30 per share in a potential acquisition by cloud computing firm CoreWeave. This optimistic outlook is driven by Core Scientific's existing AI contracts and the substantial value of its data center infrastructure.

The $30 Price Target

This target price represents a near doubling from its current trading level, currently just above $16. The Wall Street Journal reported that CoreWeave is again in advanced talks to acquire Core Scientific after a previous offer of $5.75 per share failed to materialize earlier in 2024. Following this report, CORZ shares surged 33% to close above $16, which Cantor believes still undervalues the company significantly.

The AI Advantage

The core of Cantor's bullish thesis lies in Core Scientific's 12-year, $3.5 billion infrastructure lease with CoreWeave. This agreement provides CoreWeave with 200 megawatts of AI compute capacity. Cantor values this lease stream at $24 per share, applying a conservative 15x profit multiple commonly used for traditional data center REITs. Furthermore, they add another $11.70 per share based on the replacement value of Core Scientific's 570MW power infrastructure.

A Broader Trend: The BTC-AI Pivot

Core Scientific isn't alone in recognizing the potential of repurposing Bitcoin mining infrastructure for AI. Rittenhouse Research also highlighted how crypto companies are shifting to AI infrastructure. The report emphasized that the infrastructure used for mining Bitcoin can be efficiently repurposed for AI algorithms which offer stable long term cash flows.

The Risks Remain

It's important to note that not all transitions away from Bitcoin mining are successful. Bit Digital's decision to dump Bitcoin rigs for Ethereum staking negatively impacted its stock. Canaan, which had ambitions to diversify into AI hardware, shuttered its chip unit entirely. Core Scientific aims to have found a sweetspot leveraging their mining footprint to enter the AI infrastructure sector.

Key Takeaways:

• Cantor Fitzgerald believes Core Scientific (CORZ) could reach $30 per share due to a potential CoreWeave buyout.
• The company's AI infrastructure lease and data center assets are key drivers of this valuation.
• A broader trend is emerging where Bitcoin mining companies are repurposing their infrastructure for AI compute.
• Not all pivots away from Bitcoin mining are successful, so execution is critical.