Core Scientific Could Surpass $30 in CoreWeave Deal: Cantor Fitzgerald
In a research note published Thursday evening, Cantor Fitzgerald argued that Core Scientific (CORZ) could fetch more than $30 per share if it is acquired by cloud giant CoreWeave, citing both the long-term cash flows from its AI contracts and the replacement value of its data centers.
This would be almost double the current level, which is just above $16.
The note came just hours after The Wall Street Journal reported that AI cloud company CoreWeave is back in active talks to buy Core Scientific after failing to offer $5.75 a share in 2024.
CORZ shares rose 33% to close at $16 on Thursday, but Cantor believes the company is still undervalued by at least 50%.
The optimistic forecast is based on a 12-year, $3.5 billion infrastructure lease contract that Core Scientific signed with CoreWeave in 2024 to provide 200 megawatts of AI capacity.
Cantor estimates rental income at $24 per share, using a conservative 15x earnings multiple typical for traditional data center REITs. Add another $11.70 per share to recoup the value of CORZ's 570 MW of power infrastructure, and the upside is clear.
BTC – AI's Turning Point
However, Cantor is not alone in arguing that the computing power used to process data in BTC mining could be more effectively applied to AI.
Rittenhouse Research, a new fintech and AI-focused firm, released a report in May that found the most successful crypto companies aren’t increasing their bets on Bitcoin. Instead, they’re shifting to providing AI infrastructure.
Rittenhouse noted that when Galaxy Digital acquired the Helios data center in late 2022, it was seen as a lifeline for the struggling mining company, but actually turned out to be a strategic asset in the AI space as demand for data center space skyrocketed with the popularity of ChatGPT and LLM.
“The infrastructure used to mine digital gold is better suited to processing AI algorithms,” Rittenhouse wrote at the time.
The underlying argument is that AI generates stable, long-term cash flows, unlike BTC mining, whose revenues fluctuate wildly every four years due to halvings and which is heavily dependent on Bitcoin's price volatility cycles.
Rittenhouse emphasized that the future profitability of BTC mining also depends on the ability of mining companies to design chips that are significantly more efficient with each cycle given the halving, which is becoming increasingly challenging as the gains from silicon compression begin to wane.
But not every turn from BTC is successful
While Cantor and the market at large are eagerly awaiting Core Scientific's potential turnaround, not all of its forays away from BTC mining have been so fortunate.
As CoinDesk recently reported, Bit Digital is selling off its Bitcoin rigs to focus solely on Ethereum staking, and the market sent its shares down 15% during Thursday's trading session in New York.
Canaan, which once hoped to diversify into AI hardware, has now shuttered its chip unit entirely, failing to make headway. Its shares have fallen nearly 75% in the past six months, closing at 63 cents on Thursday.
However, Core Scientific may have found the best path by using its mining capabilities to take advantage of the $100 billion-plus AI infrastructure boom.
If Cantor's prediction turns out to be correct, CoreWeave's second offering for CORZ could be significantly different from the one they made last year and become a new benchmark for the entire sector.
Neither CoreWeave nor Core Scientific have publicly commented on the situation.
Source: cryptonews.net
