Core Scientific (CORZ) Poised to Dominate AI Hosting Market

Core Scientific (CORZ), a prominent player in the cryptocurrency mining sector, is set to make significant strides in the artificial intelligence (AI) hosting market, according to a recent report from broker Canaccord. The firm initiated coverage of the company with a "buy" rating and a price target of $16, indicating a bullish outlook for its stock. Following the announcement, shares rose by 1.4% to $12.15 in early trading.

A Landmark Contract

The catalyst behind Canaccord’s optimistic assessment is a transformative 12-year contract that Core Scientific signed with hyperscaler CoreWeave in June. This agreement is viewed as a groundbreaking development for the company, being labeled as the "first and landmark 'mega deal'" within the bitcoin mining industry for providing high-performance compute (HPC) data center hosting capacity. Hyperscalers are large-scale data centers that specialize in delivering massive computing power, essential for AI and data-intensive applications.

Key Drivers for Growth

Canaccord analysts, led by Joseph Vafi, identified three main factors driving Core Scientific’s growth potential:

1. Ramping Revenue in AI Hosting: As demand for AI computing continues to surge, Core Scientific is well-positioned to capture a significant share of this burgeoning market through its partnership with CoreWeave.
2. Improved Cash Flow: The new contract is expected to bolster the company’s cash flow, allowing for further investments and operational enhancements.
3. Potential Site Acquisitions: Analysts believe there may be more site acquisitions in the pipeline, which could further enhance Core Scientific's capacity and market presence.

The price target set by Canaccord breaks down as follows: approximately $12 is attributed to the CoreWeave contract, $3 is associated with the company's remaining power supply earmarked for AI hosting, and around $1 reflects its bitcoin-mining operations.

Continued Bitcoin Mining Operations

Despite the focus on AI hosting, Core Scientific has not completely abandoned its bitcoin mining endeavors. The report highlights that the company still possesses about 230 megawatts (MW) of power available for bitcoin mining, even after repurposing nearly 500 MW for AI applications. This dual capability allows Core Scientific to maintain a diversified revenue stream.

Conclusion

With its strategic move into AI hosting, underpinned by a landmark contract and a solid financial outlook, Core Scientific is positioned to become a major player in both the AI and cryptocurrency sectors. As the demand for high-performance computing continues to rise, investors may want to keep an eye on Core Scientific as it leverages its strengths in both industries to drive growth and innovation.

September 2024, Cryptoniteuae