Investing.com -- Shares of Core Scientific (NASDAQ:CORZ) rose on Monday during pre-market trading, following Jefferies' initiation of coverage with a "buy" rating.
The brokerage underscored Core Scientific's evolving strategy from its origins as a Bitcoin miner toward building high-performance computing data centers focused on artificial intelligence demands.
Jefferies analysts flagged the company’s recent pivot as a post-bankruptcy comeback story, praising Core Scientific's capacity to leverage access to major power infrastructure—previously used for Bitcoin mining—for new AI-focused data centers.
The analysts said that Core Scientific is uniquely positioned to seize opportunities in the booming AI market, thanks to its experienced data center development team, which includes veterans from firms like Equinix (NASDAQ:EQIX) and HP (NYSE:HPQ).
The analysts at Jefferies emphasized the favorable economics of Core Scientific's lease with CoreWeave, a GPU-focused cloud service provider.
As part of the agreement, CoreWeave funds construction, reducing the need for immediate capital from Core Scientific, which will repay through a capex credit system tied to revenue.
This partnership reflects the growing industry need for large-scale, reliable power sources to support AI operations.
Jefferies issued a $19 price target for Core Scientific, suggesting a 42% upside from its current trading level of $13.37.
The brokerage expects Core Scientific's revenue to increasingly shift from Bitcoin mining to AI hosting services, projecting that AI-related revenue will account for 59% by 2027 and 80% by 2029.
This shift aligns with broader trends as large technology companies continue expanding their AI capacities and data infrastructure investments.
While Core Scientific plans to maintain its Bitcoin mining operations—capitalizing on operational efficiency upgrades—it is clear that the company sees its future in hosting high-performance compute workloads.
The mining segment, although profitable, will eventually stabilize without substantial further expansion.
Jefferies identified risks, including challenges in executing HPC projects and the potential volatility of Bitcoin prices, which remain relevant to Core Scientific’s business.
However, with AI infrastructure demand surging, the analysts expressed confidence that Core Scientific will secure more leasing deals with major tech firms by year-end. Successful execution of these agreements is expected to validate Core Scientific’s pivot to high-performance compute hosting.
Jefferies’ buy rating comes at a time when Core Scientific is attempting to rebuild investor confidence after emerging from Chapter 11 bankruptcy earlier this year.
With its repositioning efforts gaining traction and strong demand for AI computing infrastructure, analysts see the stock's future as promising and well-timed to capitalize on market shifts toward AI and data center growth.