Investing.com -- Crypto miner Core Scientific Inc (NASDAQ:CORZ) has inked a 12-year agreement with AI hyperscaler CoreWeave to host CoreWeave's GPUs, drawing as much as 200MW of power. The deal is expected to generate $3.5 billion in revenue, roughly $290 million annually, for Core Scientific.
In a separate move, CoreWeave offered to acquire Core Scientific for $5.75 per share, valuing the company at $1.6 billion, or nearly $2 million per MW of power capacity. In comparison, the 14 listed mining operators currently trade between $680,000 and $8.4 million per MW.
JPMorgan (NYSE:JPM) suggests this deal may set a new valuation floor and indicate that the race for power capacity is intensifying, leading to additional stock price increases or consolidation in the coming months.
News of the deal and the acquisition offer sparked a rally in the market, with the 14 U.S.-listed operators followed by JPMorgan adding $1.6 billion in market cap, an increase of 9%. This also fueled speculation and debate about whether other mining operators might also become acquisition targets. Additionally, the deal has validated Iris Energy's own high-performance computing pilot efforts, which are rated overweight by JPMorgan.
"This is the largest HPC hosting agreement announcement to date and highlights alternative and potentially more accretive use cases for mining facilities," JPMorgan stated. "We think this deal potentially raises the valuation floor for sub-scale mining operators, as a new class of buyers, namely Hyperscalers, has emerged," the report added.
Such deals, which shift power capacity away from miners, could rationalize the Bitcoin network by easing network difficulty and improving the profit profile of remaining operators.
The U.S. currently generates 1,300GW of electricity, with an additional 500GW of capacity under development. The Federal Energy Regulatory Commission estimates that U.S. data centers will require 21GW of power in 2024 and 35GW by 2030, consuming up to 9% of all U.S. electricity generation by then.
The Electric Power Research Institute estimates that AI applications account for 10% to 20% of data center electricity consumption today, with this proportion expected to grow as AI models are more energy-intensive than traditional data retrieval, streaming, and communication applications. For example, ChatGPT queries require 10 times the electrical demands of traditional Google (NASDAQ:GOOGL) searches.
With immediate power access in relatively short supply, Hyperscalers and AI firms are exploring alternatives, including leasing power or datacenter capacity from, or outright acquiring, bitcoin miners. JPMorgan estimates that U.S.-listed miners alone draw up to 5GW of power and have access to another 2.5GW through power purchase agreements, making them attractive targets. Some operators are feeling the financial pinch from the recent block reward halving, which cut industry revenues in half, and are actively exploring exit strategies.
High performance computing (HPC) has been a hot topic among miners recently. To date, a handful of U.S. operators have announced pilot HPC programs, including IREN, Core Scientific (CORZ), and Terawulf (WULF).
"This Core Scientific news is most relevant and potentially impactful to IREN, which was early to embrace HPC, trades at just $1.5M per MW of capacity, and has a track record of delivering data centers on time and operating them with high uptime," JPMorgan stated.