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Core Scientific purchase doesn't add any profits to CoreWeave, says D.A. Davidson's Gil Luria
CNBC Televisionยท 2025-07-08 12:41
Acquisition Analysis - Coreweave's acquisition of Core Scientific is viewed as a financial engineering tactic to secure energy contracts, which are becoming scarce for data centers [1][3] - The acquisition doesn't necessarily add profitability to Coreweave due to Core Scientific's past losses and negative cash flow [2] - The deal involves Coreweave using its "expensive" stock to secure energy resources [3][5] Financial Implications - Coreweave borrows at a rate of 12-125% but only generates 5% returns on its assets, making the business model questionable [5] - Analyst doubts the projected cost savings from the acquisition, as the companies operate in different business areas with limited synergy [6][7] - Core Scientific took $105 of expenses sold them to Coreweave for $1 who turned around and sold that dollar for $105 [7] Bitcoin Mining Industry Impact - The deal makes Bitcoin miners more valuable because data center power is more valuable for AI than for mining Bitcoin [9] - Core Scientific received an "amazing" price due to the scarcity value of having data center operations next to a power source [10]