Core Scientific: Emerging Leader in AI Hosting with New High-Performance Contracts

Core Scientific's Transformation into AI Hosting Leader

Core Scientific (CORZ) is making waves in the market as it transitions from a bitcoin mining operation to a key player in artificial intelligence (AI) hosting. A recent report by broker Canaccord has given the company a buy rating and set a fresh price target of $16.

Stock Performance

Following the report's release, Core Scientific shares experienced a 1.4% rise, reaching $12.15 in early trading. This positive momentum reflects the market's optimistic outlook on the company's future.

Strategic Partnership with CoreWeave

A critical factor in Core Scientific's revamped strategy is a pivotal 12-year contract signed with hyperscaler CoreWeave back in June. This deal is hailed as a game-changing agreement for the bitcoin miner, marking it as the first major contract in the industry to provide high-performance compute (HPC) data center hosting capacity. Hyperscalers like CoreWeave operate large-scale data centers that deliver substantial computing power, making this partnership particularly significant.

Three Key Drivers for Core Scientific's Growth

Canaccord's analysts, led by Joseph Vafi, have identified three primary drivers for Core Scientific's stock performance:

• Increasing Revenue from AI Hosting: With the rise of AI applications, demand for high-performance computing is skyrocketing, positioning Core Scientific to capitalize on this growth.
• Improved Cash Flow: The new contracts and strategic partnerships are expected to enhance the company's cash flow, further strengthening its financial position.
• Potential for Additional Site Acquisitions: As the company expands its footprint, acquiring additional sites for hosting and mining could provide further revenue streams.

Breakdown of the Price Target

The price target set by Canaccord is reflective of the company's multifaceted approach. Of the estimated $16 price target:

• Approximately $12 is attributed to the CoreWeave contract.
• About $3 is associated with the company’s remaining power supply designated for AI hosting.
• Roughly $1 represents the company's revenue from its bitcoin-mining operations.

Continued Potential from Mining Operations

Despite the shift towards AI hosting, Core Scientific has not neglected its bitcoin mining operations. The company has repurposed nearly 500 megawatts (MW) of its power capacity, focusing on AI hosting. Nevertheless, it still retains about 230MW of power dedicated to traditional bitcoin mining, showcasing that there is still potential upside from its mining endeavors.

Conclusion

Core Scientific is poised to emerge as a significant force in the AI hosting market while maintaining its bitcoin-mining roots. With the strategic partnership with CoreWeave and a positive outlook from analysts, the company is set to embark on a promising growth trajectory.