Brokerage firm HC Wainwright has downgraded its rating on Bitcoin miner Core Scientific (CORZ) to Neutral from Buy, citing increased risk exposure following the recent announcement of an agreement with AI cloud services provider CoreWeave (CRWV).
The brokerage removed its price target for the stock, emphasizing that Core Scientific’s performance is now more closely tied to CoreWeave’s growth.
At press time, Core Scientific shares were up 1.3%, trading around $15. They were down 18% yesterday after the deal was announced. CoreWeave shares were down 2.6%.
Artificial intelligence infrastructure company CoreWeave said on Monday it would acquire Core Scientific, with the bitcoin miner’s shares valuing at about $20.40 per share based on recent closing prices.
While the broker continues to view its own Core Scientific sales forecasts as conservative, especially since they do not include next year’s planned HPC (high-performance computing) capacity expansion, it noted several outstanding issues, including unfinished infrastructure purchases.
However, the company’s analysts expect the deal to be approved by shareholders, and there are no signs of delays in the timing of its closing.
Mr. Wainwright described Core Scientific as a company with “high levels of risk inherent in cryptocurrency companies,” citing the volatility of the network’s hash rate and fluctuations in the cryptocurrency market.
The report said that while Core’s diversified operations help offset some of this risk compared to smaller peers, the company now also takes on CoreWeave’s risks related to AI adoption, customer concentration and leverage.
Additional challenges include potential dilution, mining equipment shortages, increased regulatory oversight and operational hurdles.
On a more positive note, the expected contribution of HPC revenue in future quarters could help reduce the company’s sensitivity to Bitcoin price cycles and stabilize its results, the report said.
Read more: CoreWeave’s all-stock offer to acquire Core Scientific likely to attract attention from shareholders: KBW
Source: cryptonews.net
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