CoreWeave CEO says Core Scientific 'not a need to have' as shareholder opposition to deal rises

News Summary
CoreWeave CEO Michael Intrator told CNBC on Tuesday that the firm's proposed acquisition of Bitcoin miner and data center company Core Scientific would be a "nice to have" rather than a necessity, as Core Scientific shareholders prepare to potentially block the deal. In July, AI cloud provider CoreWeave proposed an all-stock deal valued at around $9 billion to buy Core Scientific. Immediately after the news, Core Scientific's stock price plummeted nearly 18%. The deal has faced criticism, with key proxy advisor Institutional Shareholder Services (ISS) recommending shareholders vote against the acquisition on Monday. ISS noted that Core Scientific's share price has continued to rise after the deal was announced, suggesting investors believe the company is valued higher than CoreWeave's offer. Intrator expressed "disappointment" but reiterated that CoreWeave would not raise its offer, believing it is a "fair representation of the relative value of the two companies as an all-stock deal." Earlier this month, Two Seas Capital, a major Core Scientific shareholder, publicly opposed the acquisition, stating that CoreWeave's offer price is too low. Shareholders are set to vote on the deal on October 30. CoreWeave has been aggressively pursuing acquisitions of AI-related firms like OpenPipe, Weights & Biases, and Monolith this year to expand its product offerings.
Background
CoreWeave is an AI cloud provider specializing in Nvidia-powered computing power and data center services for hyperscalers like Microsoft. The company has been in an aggressive expansion mode, acquiring AI-related firms to bolster its product offerings and infrastructure. Core Scientific is primarily a Bitcoin miner that also owns data center facilities. Its data center assets have garnered market attention due to the surging demand for AI computing. CoreWeave's proposed acquisition aimed to integrate these data center resources to support its growing AI infrastructure needs.
In-Depth AI Insights
Why is CoreWeave unwilling to raise its offer despite shareholder opposition, labeling Core Scientific as 'not a need to have'? What are the true strategic considerations behind this stance? - CoreWeave's firm stance likely reflects its confidence in its own valuation and cash flow, as well as a sober assessment of Core Scientific's assets. While data center valuations have surged in the AI boom, CoreWeave might view Core Scientific's Bitcoin mining legacy as diluting the pure AI play, or believe its data center infrastructure requires significant retrofitting for optimal AI workloads, thus impacting its intrinsic value. - Furthermore, characterizing the deal as "nice to have, not a need to have" could be a negotiation tactic to diminish Core Scientific shareholders' leverage, signaling that CoreWeave possesses alternative expansion strategies, such as organic build-outs or acquiring other pure-play AI data center assets, thereby reducing its dependency on this particular transaction. What are the implications for Core Scientific and its shareholders if this acquisition fails? - If the deal collapses, Core Scientific's stock price might experience short-term volatility, but in the long run, given the attractiveness of its data center assets driven by AI demand, the company could become a target for other potential acquirers or opt to operate independently, optimizing its data center infrastructure to better serve the AI market. - For dissenting shareholders, a failed acquisition might signify their success in defending the company's perceived undervalued worth, potentially paving the way for higher future offers or superior strategic alternatives. However, this also carries uncertainty regarding the company's ability to effectively leverage its assets without CoreWeave's capital and technological integration. How does this contentious deal reflect the current valuation dynamics and strategic competition within the AI infrastructure market? - This transaction highlights the rapidly inflating valuations within the AI infrastructure sector, particularly for data centers. The opposition from Core Scientific shareholders suggests a belief that AI-related assets warrant even higher valuations, even if the core business isn't purely AI, reflecting a degree of market exuberance. - CoreWeave's aggressive acquisition strategy, coupled with its "not a need to have" attitude towards specific assets, also hints at the complex strategic maneuvering by AI giants vying for scarce data center and compute resources. They must balance rapid expansion to meet demand with avoiding overpayment, striving for financial discipline and strategic flexibility in a high-growth market.