CoreWeave Deal Spree Goes on After Core Scientific Snub

Key Concepts

• Core Scientific Partnership: The ongoing relationship between the speaker's company and Core Scientific, a provider of infrastructure.
• Acquisition Strategy: The company's approach to acquiring other businesses, distinguishing between strategic and opportunistic acquisitions.
• Infrastructure Buildout: The company's initiative to construct its own data centers.
• Capital Raising: The process of securing funds to support growth and infrastructure development.
• AI Infrastructure: The growing demand for computing power and data centers to support artificial intelligence development.
• Customer Diversification: The company's efforts to expand its client base beyond a single provider.

Core Scientific Partnership and Acquisition

The speaker emphasizes the solid partnership with Core Scientific, stating that their company remains a significant consumer of Core Scientific's services and infrastructure for the next ten to fifteen years, with extensions planned. Despite this ongoing relationship, the shareholders of Core Scientific voted down an acquisition proposal. The speaker clarifies that from a strategic perspective, the acquisition made sense to both parties, but the decision ultimately came down to price. The speaker's company had put forth a bid, and while they are acquisitive (mentioning recent acquisitions like Mariano, Waits, Biases, and Monolith), there is a specific price point at which such a transaction becomes viable. If the price exceeds approximately 10% of their valuation, they will continue to use Core Scientific as a vendor.

Customer Diversification and Infrastructure Development

The speaker expresses no worry about Core Scientific diversifying its customer base. Their company's footprint within Core Scientific's ecosystem is approximately 580 megawatts of infrastructure. Crucially, in the current quarter, they have signed over 600 megawatts of data center infrastructure exclusively outside of Core Scientific. This highlights their proactive approach to securing infrastructure independently. They hope Core Scientific remains a strong operator and continues to invest in its business and execution capabilities, as they have worked with them for the past five years.

Regarding potential acquisitions of other infrastructure providers like Terabits, the speaker reiterates their acquisition philosophy: acquisitions are both strategic and opportunistic. Strategic acquisitions, like those of Marimow or Waits, Biases, and Monolith, are aimed at broadening their software solutions and moving the company forward. The acquisition of an infrastructure provider is considered an opportunistic acquisition. The company is actively building its own data centers from the ground up to gain additional control over infrastructure. Examples include a data center being built in Lancaster, Pennsylvania, and another in Kenilworth, New Jersey. They are continuously reviewing opportunities within both strategic and opportunistic buckets, always prioritizing those that advance the company, provided they are at the right price.

Capital Raising and Financial Analysis

The speaker addresses the need to raise more capital for their data center offering. They state that their company, Core Scientific, has been at the forefront of raising capital for buildouts, being the first to implement GPU-based lending products. Their growth is described as "raging along," with significant interest in their product and software solutions for a broader client base. They will continue to raise capital to support this activity, as they have done previously.

In response to a critique from D.A. Davidson regarding their capital structure and returns (specifically, a 5% return on a 9% investment), the speaker fundamentally disagrees with the analysis. They assert that their company generates great returns and provides essential infrastructure for building and delivering artificial intelligence. They believe they have a strong business plan and a large, diversified shareholder base that supports their vision. They are committed to expanding the business and diversifying their customer base.

Anxieties Around AI Infrastructure Buildout

The speaker finds it interesting that companies like Meta are criticized for investing heavily in data centers, while Amazon and Google are congratulated for similar investments. They view this scrutiny on large investors as bullish for their own business, as it underscores the inevitable need for AI infrastructure. They acknowledge Meta's strategy and disciplined execution in building their AI solutions and express excitement about adding Meta to their list of large, active customers who will define the future of compute and the world for the next fifty years.