Core Scientific Cut to Neutral as CoreWeave Deal Adds Complexity: H.C. Wainwright

Core Scientific (CORZ), a bitcoin mining company, saw its stock downgraded to “neutral” from “buy” by H.C. Wainwright, a brokerage firm. This downgrade stems from Core Scientific’s recently announced all-stock acquisition by CoreWeave (CRWV), an AI cloud provider. The deal values Core Scientific at approximately $20.40 per share based on recent closing prices.

H.C. Wainwright’s decision reflects an increased risk profile for Core Scientific, now more directly tied to CoreWeave’s performance. While the brokerage maintains conservative sales estimates for Core Scientific, acknowledging the potential impact of next year’s planned high-performance computing (HPC) buildout, several uncertainties remain. These include outstanding infrastructure procurement and the inherent volatility associated with cryptocurrency companies, including network hashrate fluctuations and the broader crypto market’s instability.

Despite Core Scientific’s diversified operations, which offer some risk mitigation compared to smaller competitors, the merger introduces exposure to CoreWeave’s challenges. These include risks related to AI adoption rates, customer concentration, and leverage. Further headwinds facing Core Scientific include potential shareholder dilution from the acquisition, potential mining equipment shortages, increasing regulatory scrutiny, and operational hurdles.

However, the anticipated future contribution of HPC revenues offers a potential positive. This revenue stream could lessen Core Scientific’s dependence on bitcoin price cycles and contribute to more stable financial results. H.C. Wainwright expects shareholder approval for the transaction, with no foreseen closing delays. The brokerage removed its price target for Core Scientific shares, which were trading around $15 at the time of the report’s publication, up 1.3% after an 18% drop following the announcement of the acquisition. CoreWeave shares were down 2.6% at the same time. KBW, another brokerage firm, anticipates shareholder scrutiny of the deal.