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

Shares of bitcoin miner Core Scientific (CORZ) were downgraded to neutral from buy by broker H.C. Wainwright, which cited heightened risk exposure following the company’s recently announced deal with AI cloud provider CoreWeave (CRWV).

The brokerage removed its price target on the stock, noting that Core Scientific’s performance is now more tightly linked to CoreWeave’s trajectory.

Core Scientific shares were 1.3% higher at publication time, trading around $15. The stock fell 18% yesterday following news of the deal. CoreWeave was 2.6% lower.

AI infrastructure firm CoreWeave said Monday it agreed to buy Core Scientific in an all-stock transaction valuing the bitcoin miner at about $20.40 per share, based on recent closing prices.

While the broker continues to view its own Core Scientific sales estimates as conservative, particularly as it hasn’t factored in next year’s planned HPC (high-performance computing) buildout, it flagged several unresolved variables, including outstanding infrastructure procurement.

Still, the firm’s analysts expect shareholder approval for the transaction, with no indication of delays in the closing timeline.

H.C. Wainwright characterized Core Scientific as carrying “the inherent high-risk levels of cryptocurrency companies,” citing network hashrate volatility and crypto market fluctuations.

While Core’s diversified operations help offset some of that risk compared with smaller peers, the company now also takes on exposure to CoreWeave’s AI adoption risks, customer concentration and leverage, the report said.

Additional headwinds include potential dilution, mining equipment shortages, increasing regulatory scrutiny and operational hurdles.

On a more positive note, the expected contribution of HPC revenues in future quarters could help reduce the company’s sensitivity to bitcoin price cycles and stabilize results, the report added.

Read more: CoreWeave’s All-Stock Bid for Core Scientific Likely to Draw Shareholder Scrutiny: KBW