After ditching its cloud services and pivoting toward becoming a real estate-style operator that rents out server space to hyperscalers, Applied Digital’s (APLD) new operational strategy had gotten off to a slow start – until last month.
The company announced in June that it had inked two massive 15-year lease agreements with AI hyperscaler CoreWeave (CRWV) to deliver 250 megawatts (MW) of critical IT load to power CoreWeave’s AI and high-performance computing (HPC) infrastructure.
As part of the deal, CoreWeave will be renting out space at Applied Digital’s data center campus in Ellendale, North Dakota.
The deal is expected to generate roughly $7 billion in total revenue for Applied Digital over its lifetime.
But CoreWeave on Monday announced that it had agreed to acquire data infrastructure provider Core Scientific (CORZ) for $9 billion in an all-stock transaction.
The deal is expected to close in the fourth quarter of this year, pending regulatory and shareholder approval.
The acquisition is essentially allowing CoreWeave to bring at least some of its data center needs for large-scale AI development in-house.
The company notes in a press release that it will own approximately 1.3 GW of gross power across Core Scientific's national data center footprint with an incremental 1 GW+ of potential gross power available for expansion.
“This acquisition accelerates our strategy to deploy AI and HPC workloads at scale,” CoreWeave’s co-founder and CEO Michael Intrator said in a statement. “Verticalizing the ownership of Core Scientific’s high-performance data center infrastructure enables CoreWeave to significantly enhance operating efficiency and de-risk our future expansion, solidifying our growth trajectory.”
CoreWeave is cutting overhead costs
In explaining the benefits of the deal, CoreWeave indicated that it will lead to the “immediate elimination” of “over $10 billion of cumulative future lease overhead to be paid for existing contractual sites over the next 12 years.”
The company adds that it “will gain greater control over a critical power footprint and optionality for future power capacity” through the Core Scientific acquisition.
The $10 billion in savings for “cumulative future lease overhead” is speaking specifically to what CoreWeave would've paid to Core Scientific, as Bloomberg’s Liana Baker points out that the former has been the latter’s biggest client.
CoreWeave is dropping $9 billion on the data-center operator Core Scientific in an effort to gain more direct control over the physical assets powering the artificial-intelligence boom https://t.co/LKMAjsd3Sr pic.twitter.com/RH6uxed7B4
undefined Bloomberg TV (@BloombergTV) July 7, 2025
However, it also raises questions about what it means for its contractual agreements with Applied Digital that were signed just a month ago.
Applied Digital said the first 100 MW building at its Ellendale campus is slated to go live in Q4 2025. A second building, with 150 MW capacity, is expected to be operational by mid-2026.
CoreWeave also holds an option on a third building — another 150 MW — now in the planning stage for a 2027 launch.
To be sure, large-scale AI development is going to require a staggering amount of power, which could conceivably mean that companies like CoreWeave will use multiple data centers.
But the company also indicated that the deal for Core Scientific gives it the potential for “future expansions and additional power procurement.”
Meanwhile, investors didn’t appear to be thrilled with the deal, especially for Core Scientific, which saw its shares drop by as much as 20% after the acquisition was announced on Monday.
It ended the day down 17.6%.
“It’s an all-stock deal so it’s hard for Core Scientific shareholders to understand what actually is the value of the deal,” Bloomberg’s Baker said. “It’s $9 billion today, but we don’t know what it will be tomorrow or when the deal closes. CoreWeave is a very volatile stock.”
Mike Alfred, founder and partner at Alpine Fox LP, said on X that “everyone understands that CoreWeave’s valuation is too high and doesn’t reflect IPO unlocks coming in September.”
He called the all-stock transaction “not ideal” for Core Scientific.
“I really think Core Scientific is leaving a lot of money on the table,” he said.
Shares of CoreWeave were down 5.5% on Monday.
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