By Robert Cyran
NEW YORK, July 7 (Reuters Breakingviews) - When it comes to benefitting from the artificial intelligence boom, CoreWeave CRWV.O and Core Scientific CORZ.O are joined at the hip. Combining the two, which together provide data center infrastructure and sell computing power to AI developers, makes sense. Their merger, unveiled Monday, puts a $9 billion price tag on Core Scientific based on pre-announcement share prices. The problem is that a tie-up is boringly concrete, testing valuations that have been bid up in an ecstatic market frenzy.
After an initial public offering in March, CoreWeave’s shares skyrocketed over 300%, valuing it at some $75 billion. It sits in the middle of the AI boom, leasing access to data centers that crunch bits for chatbots like ChatGPT. It depends, in turn, on infrastructure leased to it by Core Scientific.
Collapsing this arrangement into one company should deliver $500 million of cost savings, CoreWeave reckons. Taxed at the statutory corporate rate and capitalized, they are worth perhaps $4 billion. Furthermore, increasing scale and adding assets that can serve as collateral may help CoreWeave trim its debt costs. The company’s short-term obligations carried an interest rate of about 10% in its most-recent quarter, making this a tantalizing promise. Executives said that savings could equate to “several” percentage points.
Yet the buyer’s stock fell 2% in morning trading on Monday. The seller’s stock fell 16%, to around $16 a share, despite the nearly $20 promised by CoreWeave’s all-stock offer. Some of this may simply be the result of preceding hype: even with Monday morning’s fall, the seller’s shares have risen 20% since news of a potential tie-up surfaced in June. Today’s price is also a nice bump from the $1 billion cash offer it rejected a year ago, as Reuters reported. For investors sitting on a handy gain, it might be worth seizing the bird in hand.
More tryingly, though, the deal is a test of how durable AI mania will prove. The merger is expected to close in the last quarter of 2025, leaving time for various shocks, whether tariffs or disruptive chatbot developers like China’s DeepSeek, to knock the market – and the stock the buyer is paying with. Meanwhile, restrictions preventing CoreWeave insiders from selling shares are set to expire before then.
Adding to the risk, CoreWeave’s fate is tied to a select few customers and suppliers, whose whims may determine whether its thus-far stellar growth than continue. It faces far larger competitors like Amazon.com and Alphabet’s Google. This deal makes sense, but is a troubling reminder of the potential downside.
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CoreWeave said on July 7 that it had agreed to buy Core Scientific in an all-stock deal valued at $9 billion using closing prices on July 3, the last day of trading before the deal was announced.
Based on those prices, the implied offer comes in at $20.40 per share, a premium of nearly 66% to Core Scientific’s stock price prior to news of a potential buy-up broke in June.
Core Scientific shares were down roughly 16% as of 16:00 GMT on July 7, while CoreWeave shares fell over 2%.
CoreWeave and Core Scientific ride a wave of hype