Data center owner Core Scientific's decision to walk away from a proposed $9 billion acquisition by cloud provider CoreWeave appears to be getting a positive response from investors in its stock.
Shares of Core Scientific, the Austin, Texas-based owner of artificial intelligence-driven data center infrastructure across the country, closed at $22.90 per share on Monday, up more than 6.3% for the day. Core Scientific said late last week it was scrapping the all-stock acquisition by CoreWeave, Core Scientific's only customer amid a lack of shareholder support.
The decision by Core Scientific comes amid an AI boom that has companies consolidating as data center deals become more complex and power is increasingly even more difficult to find. Before being called off, the Core Scientific and CoreWeave deal showed how cloud providers could team up with data center owners to save billions of dollars in real estate costs.
"Our shareholders voted decisively not to move forward with the transaction," Core Scientific CEO Adam Sullivan said on Friday during a call with investors and analysts. "The opportunity ahead of us is the strongest it has ever been in our history. We are the foundation of the AI revolution, building the critical infrastructure that powers the technologies of tomorrow."
Sullivan said the logic of the deal — combining Core Scientific with CoreWeave for "significant financial synergies" — was understood by stakeholders, but there was criticism around its structure meant to preserve upside value of shareholders. Based on the gains since the deal fell apart, analysts are saying the demise of the acquisition was good for Core Scientific, Seeking Alpha reported.
"CoreWeave's decision not to raise their offer confirms that our board negotiated the best deal possible for our shareholders," Sullivan said in the call. "That said, the outcome of the vote ultimately reflects broader market dynamics, given demand and valuation changes over the past four months."
CoreWeave will continue to be an important partner, Sullivan said, with CoreWeave having contracts that represent more than $10 billion in total revenue potential over a 12-year period. By year-end, Core Scientific plans to deliver 250 megawatts, as well as 590 megawatts by early 2027, to CoreWeave.
Core Scientific is also set to deliver more liquid cooling megawatts this year than any other publicly traded company, Sullivan said, and the firm is on track to do that again next year.
"These are extremely complex, high-density build-outs," Sullivan added. "The reality is, very few companies have the experience, the people or even the committed power to deliver them. We do."
Core Scientific plans to remain a publicly traded company and continue to trade on Nasdaq. The company has short-term challenges, including permitting delays, weather impacts and design modifications, Sullivan said. Rivals try to replicate Core Scientific's operations, but face "real challenges" with this business needing "operational maturity," he added.
"The reality is that we're still going to deliver more high-density data center capacity in a single year than some operators have built in a decade," Sullivan said.
On Monday, Apollo-managed funds said it has completed the majority interest acquisition of Stream Data Centers, a developer and operator of hyperscale data center campuses throughout the United States. Alongside the global asset manager, Principal Asset Management nabbed a minority interest in Stream Data Centers.
The Apollo-managed funds are expected to deploy billions of dollars into Stream Data Centers' pipeline that totals more than 4 gigawatts. To date, Stream Data Centers has developed more than 20 data center campuses in top U.S. markets.
Stream Data Centers is "an essential part of Apollo's strategy to scale our presence in digital infrastructure," said Apollo Partners Joseph Jackson and Trevor Mills in a statement.
The executives added, “We are excited to support the company’s continued expansion as a scaled provider of next-generation capacity for hyperscale and AI customers across key U.S. markets.”
JLL's Managing Director Curt Holcomb told CoStar News he wasn't surprised by the recent acquisition news of Stream Data Centers and Aligned Data Centers, as reported by CoStar News, because "the name of the game is scale" in the data center industry and "scale takes capital."
"We are going to see a lot more of it because these operators have been so successful and able to expand in this market," Holcomb said. "Expanding in AI takes a lot of capital and they are raising funds from institutional providers with capital to meet that demand."
Holcomb is not involved in any of the recent deals, but as a managing director with JLL's global data center solutions practice team, he's been closely tracking M&A activity.