CoreWeave's $9 Billion Power Play for Core Scientific

AI infrastructure leader CoreWeave, Inc. (NASDAQ: CRWV) has announced a $9.0 billion, all-stock deal to buy data center operator Core Scientific, Inc. (NASDAQ: CORZ).

The market reacted with immediate skepticism, and CoreWeave’s stock price declined following the news. Investors were clearly concerned that their ownership would be diluted or spread across more shares and that merging the two companies would be difficult.

While the market’s short-term concerns are understandable, they miss the bigger picture. This deal is a bold, strategic move by CoreWeave to control the most critical resource for the future of artificial intelligence (AI): power. For investors with a long-term view, this acquisition makes sense.

From Renter to Owner: Securing the AI Fuel Line

The AI industry runs on electricity. High-performance computer chips, such as the NVIDIA GB200 Blackwell hardware used by CoreWeave, are incredibly power-hungry. This has sparked a global race for data center space, and more importantly, the energy required to operate them. Instead of staying in that race, CoreWeave has decided to own the racetrack.

By acquiring Core Scientific, CoreWeave gains direct control over a substantial portfolio of data centers, featuring approximately 1.3 gigawatts (GW) of power already in place. It also secures access to another 1 GW or more for future growth.

This is a game-changer. 

It moves CoreWeave from being just another customer renting space to an owner with a secure power supply, giving it a major advantage over competitors. In this acquisition, the company gains not only Core Scientific's facilities but also its experienced talent. Core Scientific's team brings over 150 years of combined expertise in data center construction and management, significantly mitigating the risks associated with expanding into this new role.

The Price of Power: How the Deal Pays for Itself

While issuing new stock spreads ownership out, this deal's financial benefits are clear and powerful. CoreWeave is using its valuable stock to purchase physical assets that are difficult to build and essential for growth. This deal converts a substantial future bill into an asset that CoreWeave now owns.

The company expects the acquisition to deliver significant financial wins over the long run:

• It will eliminate the need to pay over $10 billion in future data center lease costs.
• It is projected to create $500 million in annual cost savings by the end of 2027.

CoreWeave was already Core Scientific’s biggest customer. By purchasing the company, CoreWeave is essentially paying itself instead of a landlord. This move is designed to create a more profitable and predictable business model for years to come.

The Hidden Value in Core Scientific's Business

Any concern that CoreWeave is acquiring a volatile Bitcoin mining company overlooks a key fact: Core Scientific is already undergoing a business transformation. The company has been actively converting its older facilities into modern, high-density data centers, which are ideal for AI customers.

Its work at its Denton, Texas, facility shows this transition plan is already in motion and working.

The value of this shift is evident in Core Scientific's financial results. For the first quarter of 2025, its old crypto-mining business had a gross margin of only 9%.

However, its new high-density colocation and digital assets business, which CoreWeave is most interested in, showed a much stronger gross margin of 46%.

This shows that CoreWeave is limiting its risk by acquiring a partner to accelerate a business line that is already proving to be more profitable.

A Long-Term Opportunity in a Short-Term Dip?

For those willing to look past the market's initial uncertainty, this acquisition strengthens CoreWeave's position as a leader in the AI industry. The short-term stock drop may even present a compelling entry point for long-term investors who believe in the company’s vision.

Of course, the success of the deal will depend on how well it is managed. Investors should keep an eye on a few key areas in the company’s upcoming quarterly reports:

• Conversion Speed: Look for updates on how quickly the company is turning old mining sites into modern AI data centers.
• Company Margins: Watch for improvements in CoreWeave’s overall operating margins as the cost savings from the deal begin to take effect.
• Savings Targets: Listen for confirmation from management that the company is on track to hit its goal of $500 million in annual savings.

This is a bold move by CoreWeave. In securing its power infrastructure, the company is building a foundation for future growth that few of its competitors will be able to match.

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The article "CoreWeave's $9 Billion Power Play for Core Scientific" first appeared on MarketBeat.