Investor Strategically Blocks $9 Billion AI Deal: Anticipated Rewards Loom

The visionary investor behind the strategic block on a colossal $9 billion acquisition in the AI sector anticipates that his calculated gamble is poised to bear fruit.

Trip Miller, founder and key figure at Gullane Capital Partners in Memphis, holds a conviction that Core Scientific, a prominent player in data center operations, is on the brink of inking substantial customer agreements that could significantly elevate its financial standing.

Looking ahead, Miller forecasts announcements exceeding a hundred megawatts worth of deals within the next three months, emphasizing the untapped potential far exceeding the perceived value of a deal with CoreWeave.

In a bold move in October, Miller, a significant stakeholder, rejected a stock conversion offer from AI cloud firm CoreWeave to buy Core Scientific, arguing it undervalued his company. Initially pegged at approximately $9 billion, the offer's worth diminished as CoreWeave's stock price fell in subsequent months. The deal faced rejection in a shareholder vote on October 30, citing economic concerns.

Miller bases his optimism of securing around 100 megawatts in commitments on insights gleaned from knowledgeable sources outside of Core Scientific. He predicts the company's ability to engage buyers for 400 megawatts this year, fueled by robust AI computing needs.

The company's representative declined to comment on market hearsay, but if realized, these commitments would paint data centers as pivotal growth avenues amid energy constraints.

Core Scientific has disclosed its data center capacity, comprising 1 gigawatt, with plans to expand an additional 1.5 gigawatts, underscoring a major opportunity amid booming AI demands.

AI's Sustained Rise Versus Bubble Speculation

The narrative suggests immense investments are fueling a sustainable AI ascendancy rather than a fleeting bubble, with a growing demand for computational power outpacing supply.

Stephen Byrd from Morgan Stanley emphasizes the looming shortage of compute power as a critical challenge for the AI sector, highlighting data centers' reliance on extensive power resources.

Research indicates a potential 47 gigawatt power gap could impact the U.S. by 2028, a deficit dwarfing New York City's average daily energy use.

Formerly crypto-centric, Core Scientific and CoreWeave have pivoted towards AI, leveraging existing energy assets to meet surges in data center demand.

Shift from Crypto to High-Performance AI

Facing energy shortages and volatility in the crypto market, the industry is increasingly leaning towards high-performance computing solutions.

Morgan Stanley anticipates a shift as mining operations transition into AI infrastructure, potentially converting around 60% of current crypto mining capacity to AI computing over several years.

Companies like Cipher Mining are responding, announcing a new data center project in Texas to cater to AI firm Fluidstack, driving its stock price up markedly.

Likewise, an agreement between Iren and Microsoft marks a significant step into AI cloud services, underscoring the industry's shift.

Paul Golding of Macquarie notes the trend of miners pivoting towards robust computing infrastructure as a strategic move.

Anticipated Growth in Core Scientific's Market Value

Following CoreWeave's withdrawal, Core Scientific's market valuation has experienced fluctuations, but analysts like Golding project significant growth, estimating a stock target well above current values.

Core Scientific's existing engagement with CoreWeave involves substantial megawatt allocations and lucrative long-term revenue projections, yet Miller foresees new partnerships broadening their customer base.

Miller is confident that forthcoming announcements will feature ties to AI enterprises beyond CoreWeave, reflecting wider industry adoption.