CoreWeave’s $9 billion bid for Core Scientific undervalues the data center operator, one of its largest shareholders said Tuesday. It supported the recommendation of investment advisor Institutional Shareholder Services to reject the bid.
However, as recently as last week, CoreWeave refused to increase its bid.
Amid rising prices for data centers, the conflict over the company’s valuation raises questions about whether the AI bubble fueling the flurry of data center construction and acquisitions will be sustained, or will soon pop, leaving operators with expensive infrastructure and no customers to pay for it.
Alvin Nguyen, senior analyst at Forrester Research, said what happens next with the overall data center market “depends on when AI demand slows down (when the AI bubble bursts).”
He added, “if AI demand continues, prices continue to go up, and data centers change in terms of preferred locations (cooler climates, access to water, lots of space, more remote), use of microgrids/energy production, expect [major] players to continue to dominate.”
However, said Nguyen, “if that slowdown is soon, then prices will drop, and the key players will need to either unload property or hold onto them until AI demand builds back up.”
Generational shift occurring
Asked what the overall effect of AI will be on CIOs in need of data center capacity, he said, “the new AI mega-factories alter data center placement: you don’t put them near existing communities because they demand too much power, water, land, you build them somewhere remote, and communities will pop up around them.”
Smaller data centers, said Nguyen, “will still consume power and water in contention with their neighbors (industrial, commercial, and residential), potential limiting their access or causing costs to rise. CIOs and Network World readers should evaluate the trade offs/ROI of not just competing for data center services, but also for being located near a new data center.”
Paul Nicholson, research vice president, cloud and data center networks, IDC, said, “the consolidation of data center capacity is being driven by a generational shift with AI optimized workloads dominating, with additional trends toward hybrid, and more sustainable energy-optimized infrastructure to meet demand.”
CIOs, hyperscalers, cloud buyers, and developers, he said, “must adapt to a landscape defined by capacity constraints, regulatory pressures, and the need for cost-effective, high-performance AI solutions. The CIO winners will be those whose plans modernize, diversify, and strategically partner to navigate this new era.”
Nicholson observed, “while capacity constraints may occur in multiple technology areas, there is also competition driving choice and options for CIOs from those vendors who are acquiring other data center operators and capacity.”
He pointed out, “as CIOs’ IT and AI plans move from more ad-hoc to mature enterprise AI strategies, the CIO will be developing an AI-ready tech stack that will include multiple data centers and with interconnection with many applications and APIs.”