Core Scientific (CORZ) has turned down a $1 billion buyout proposal from CoreWeave, considering it significantly undervalued and not in the best interests of its shareholders. The offer, which was for $5.75 per share, came shortly after the companies signed a series of 12-year contracts for Core Scientific to provide 200 megawatts of infrastructure for CoreWeave's high-performance computing (HPC) AI services.

The board of Core Scientific, after consulting with independent financial and legal advisors, concluded that the proposal did not adequately reflect the company's growth prospects and long-term value. The company emphasized that the offer was unsolicited.

Core Scientific plans to proceed with the announced contracts with CoreWeave, which are expected to generate over $3.5 billion in cumulative revenue. This represents a strategic shift for Core Scientific from bitcoin mining to AI data centers.

Before the partnership announcement, CORZ shares were trading at about $4.84 but rose to around $7.15 afterward. The $5.75 per share offer from CoreWeave was higher than the pre-announcement share price but lower than the current trading price, suggesting the board believes the current share price reflects the company's value post-deal.

CoreWeave will fund $300 million in infrastructure modifications, to be credited against hosting payments until repaid. The partnership is expected to generate annual revenue of around $290 million, enhancing Core Scientific’s earnings and shareholder value.

Core Scientific’s rejection of the buyout underscores its confidence in its bitcoin mining operations and the strategic benefits of the CoreWeave partnership. CEO Adam Sullivan noted that the demand for high-power sites surpasses supply, positioning Core Scientific to meet customer needs better than new data center projects. The partnership helps balance bitcoin mining and alternative compute hosting, optimizing cash flow and risk while maintaining exposure to Bitcoin’s potential gains.

This move towards AI infrastructure coincides with the recent Bitcoin halving, which reduced miner rewards and pressured mining firms to diversify. Core Scientific’s financial recovery, following a 13-month bankruptcy restructuring, has been boosted by rising Bitcoin prices and hash rates. Its shares, which resumed trading on Nasdaq in January, have seen significant gains, indicating investor confidence in its strategic direction.

The partnership with CoreWeave, which dates back to 2019, continues to emphasize the strategic importance of AI and cloud computing for Core Scientific’s future.