AI Mania: AI Mania Tanks Coreweave’s Core Scientific Acquisition

Core Scientific Acquisition Rejected by Shareholders

Shareholders of Core Scientific voted against a proposed all-stock acquisition by CoreWeave on Thursday. The offer, initially valued at $9 billion, was ultimately rejected by the company’s investors.

Shareholder Opposition

The decision followed a recommendation to vote against the deal from Sina Toussi of Two Seas Capital, Core Scientific’s largest shareholder. Two Seas Capital specializes in investments in companies emerging from bankruptcy proceedings; Core Scientific concluded its bankruptcy process in January 2024.

Shared Origins, Divergent Paths

Both Core Scientific and CoreWeave originated as cryptocurrency mining operations. However, CoreWeave has successfully pivoted its focus to providing services for AI workloads.

CoreWeave's Rapid Growth

With backing from investor and partner Nvidia, CoreWeave has experienced substantial growth. Its market capitalization has increased significantly, rising from $14 billion at the time of its IPO to $66 billion currently (approximately $140 per share). This surge reflects investor interest in capitalizing on the growth of artificial intelligence.

Existing Contract and Acquisition Offer

Prior to the acquisition proposal, CoreWeave had already secured a $10 billion, 12-year contract with Core Scientific for the utilization of its facilities in supporting AI services. The acquisition offer represented a premium over Core Scientific’s prevailing share price.

Toussi's Vision for Core Scientific

Toussi believes Core Scientific possesses the potential to replicate CoreWeave’s success independently. He argued that increased investment in AI infrastructure has driven up the valuations of comparable companies. He questioned the rationale of accepting an offer valued at only $16.40 per share.

Deal Collapses, Stock Rises

As a result of investor rejection, CoreWeave withdrew its acquisition offer. Following the news, Core Scientific’s stock price increased, and the company is now valued at a $6.6 billion market capitalization.

A Potential AI Bubble?

The rejection of the acquisition in favor of potentially more lucrative future offers is indicative of a possible AI bubble, or at least a market trending in that direction.

CoreWeave Continues Expansion

Despite the setback with Core Scientific, CoreWeave remains active in pursuing strategic acquisitions. On Thursday, the company acquired Marimo, a competitor to open source Jupyter Notebook, for an undisclosed amount. Estimates suggest Marimo had previously raised approximately $5 million.

Marimo and the AI Application Stack

Python notebooks, such as those offered by Marimo, are development tools that integrate code, multimedia, and explanatory text into a single, shareable document. They are frequently used for interactive data analysis and the development of AI applications. This acquisition will assist CoreWeave in expanding its capabilities beyond hosting to encompass AI app development.