$5B AI deal for CoreWeave, another investor objects

Billion dollar AI deal at risk

CoreWeave’s $5 billion plan to buy data center rival Core Scientific has suddenly hit a wall. What was supposed to be one of the biggest tech mergers of the year is now facing mounting resistance from shareholders who say the offer undervalues the company.

The deal was meant to help CoreWeave cut costs and expand faster, but investor pushback is turning it into a high-stakes showdown that could reshape the AI data center race.

Big names, big disagreement

Core Scientific’s major investors aren’t happy. Trip Miller of Gullane Capital, one of the company’s top three shareholders, said he plans to vote against the merger, calling the math of the deal “flawed.”

Gullane’s rejection joins other shareholder concerns, sparking doubts about the merger’s future. For CoreWeave, that means a crucial piece of its growth strategy could now be slipping out of reach.

$9 billion deal loses shine

When CoreWeave first announced the buyout in July, it valued Core Scientific at about $9 billion, a big jump from its previous market worth. But the deal’s appeal has faded as CoreWeave’s stock dropped and Core Scientific’s price climbed.

Today, the offer values Core Scientific shares below their current market price, which investors say makes no sense. That swing has made the proposed merger look far less attractive than when it was first revealed.

Shareholders demand a better offer

Two Seas Capital, which owns around 6.3 percent of Core Scientific, went public with its objections. The firm released a detailed presentation blasting the takeover as undervalued and unprofitable for stockholders.

It urged others to reject the deal in the upcoming vote, arguing that CoreWeave’s offer doesn’t reflect Core Scientific’s true worth in the booming data center market.

CoreWeave defends its final bid

CoreWeave’s CEO, Michael Intrator, quickly pushed back. He said the merger was the “most compelling path forward” for both companies and called it their “best and final” offer.

In an open letter, Intrator said the partnership would unlock long-term value through vertical integration, helping both firms benefit from the global AI infrastructure surge. But critics still aren’t convinced.

Rapid growth, rising costs

CoreWeave has exploded in value since going public earlier this year. Its market cap has soared to about $70 billion, fueled by major partnerships with OpenAI, Meta, Microsoft, and Nvidia.

But behind that growth are heavy costs. Its debt has ballooned to $11.2 billion, and operating margins have fallen from 20 to just 2 percent year over year, a warning sign that fast expansion may be outpacing profits.

The AI bubble question

CoreWeave’s story has reignited the question: Is the AI boom a gold rush or a bubble waiting to pop? Its debt-fueled expansion mirrors broader trends across the tech world, where massive bets on data power dominate the landscape.

Supporters say CoreWeave is building the backbone of future AI infrastructure. Critics worry it’s a risky overreach that could leave investors burned if the hype cools.

The data center advantage

A key reason behind CoreWeave’s offer is practical; it already rents about 270 megawatts of space from Core Scientific. Buying the company outright could save it roughly $10 billion in lease payments over the next 12 years.

That’s a massive long-term saving, making the acquisition not just about growth, but survival. Owning those facilities would also give CoreWeave more control over its biggest operating cost.

A power play in numbers

CoreWeave currently operates around 470 megawatts of data centers and aims to double that by 2025. Acquiring Core Scientific would instantly expand its capacity beyond 900 megawatts.

Take contracted and potential capacity well above 2 gigawatts, with ~1.3 GW of gross power at Core Scientific plus 1+ GW of expansion potential, and 2.2 GW already contracted across CoreWeave’s network.

That kind of expansion could strengthen its position as a top global AI infrastructure provider, giving it a serious edge in competing with tech giants.

Massive revenues, thinner profits

CoreWeave reported $1.2 billion in second-quarter revenue, double what it made a year earlier. Its revenue backlog also hit $30.1 billion, showing just how much demand it’s attracting from AI developers.

But the flip side is shrinking profitability. Rising infrastructure, borrowing, and energy costs have eaten into margins, leaving analysts questioning how long that kind of debt-heavy model can hold up.

Borrowing costs bite harder

The company’s borrowing rates range between 7 and 15 percent, steep for a firm expanding this fast. Some analysts say those rates could become unsustainable if growth slows or AI demand dips.

It’s a classic tech conundrum: spend aggressively to lead the race, or pull back and risk falling behind. For now, CoreWeave is choosing to run full throttle.

A debate over value

Two Seas Capital insists the offer undervalues Core Scientific’s real potential. It pointed out that the deal price, once $20.40 per share, has fallen to below $18, a ‘take-under,’ not a takeover.

The firm believes Core Scientific’s assets and customer base make it worth far more. With data center demand skyrocketing, that argument is resonating with other investors watching the deal unfold.

CoreWeave warns of risks

Intrator countered that Core Scientific’s dependence on CoreWeave, which makes up about 76 percent of its revenue, puts it in a risky position. Rejecting the merger, he said, could leave it vulnerable.

He urged shareholders to think “objectively” about the company’s standalone future, arguing that the deal offers a more stable path in an unpredictable AI market.

Investors see a brighter future

Opponents like Miller disagree, believing Core Scientific is just getting started. He said that if the company stays independent for another 18 months, it could be worth $30 to $40 per share.

That confidence stems from a booming data center market, where demand for AI compute power keeps pushing valuations higher, and where Core Scientific may still have room to soar.

Industry watching closely

The AI infrastructure sector is keeping a close eye on the outcome. Whether the deal succeeds or collapses, it will send a major signal about investor sentiment in the AI and data center space.

A failed merger could embolden other companies to stay independent, while a successful one might set off a wave of consolidation across the industry.

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What happens next

Shareholders are set to vote on October 30, and the outcome could redefine CoreWeave’s future. If rejected, the company may have to rethink its expansion plans or sweeten its offer to win over skeptics.

Either way, the result will shape how investors view the AI buildout era, where big risks and even bigger ambitions collide.

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What would you bet on, a risky merger or a solo rise in a booming AI market? If you enjoyed this story, give it a like or share your thoughts in the comments.

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This slideshow was made with AI assistance and human editing.