Core Scientific Shares Drop as Microsoft Reduces Commitment

Core Scientific shares took a hit on Thursday, dropping 15% in pre-market trading. The decline occurred after reports surfaced that Microsoft had scaled back some of its agreements with CoreWeave. 

The news comes as CoreWeave, a cloud computing provider for artificial intelligence (AI), prepares for its stock market debut.

Microsoft Adjusts Its Agreement With CoreWeave

It is worth mentioning that CoreWeave has been seeing remarkable growth, largely due to its close relationship with Microsoft. The tech giant had committed over $10 billion to CoreWeave’s services through 2030. 

However, according to reports, Microsoft has now reduced its commitments. The technology firm says delivery delays and missed deadlines are the primary reasons for reducing their commitments.

Nevertheless, Microsoft is still a leading partner for CoreWeave. The company remains invested in AI and cloud infrastructure but is reassessing its approach to ensure smoother operations. 

This new development happened weeks after CoreWeave and Core Scientific announced a $1.2 billion data center expansion plan.

CoreWeave Faces Challenges Ahead of Public Listing

Before now, CoreWeave was in the process of launching an initial public offering (IPO). The intention was to raise $4 billion at a valuation of $35 billion. However, Microsoft’s reduced commitment could make some investors more cautious.

The company reported $1.9 billion in revenue for 2024 but has also faced significant financial losses. CoreWeave heavily depends on Nvidia’s AI chips and has raised $14.5 billion through a mix of loans and investments. While the company has been expanding rapidly, Microsoft’s decision to reduce its commitments raises concerns about CoreWeave’s ability to meet growing demand.

Core Scientific, which partners with CoreWeave, is also feeling the impact. The sharp drop in its share price reflects uncertainty about the long-term strength of its partnerships and the broader AI cloud market.

Microsoft’s Changing Strategy in AI and Cloud Computing

Microsoft remains one of the most prominent players in AI and cloud computing, but withdrawing from some CoreWeave agreements suggests a shift in its approach. Rather than relying too heavily on a single provider, the company may diversify its cloud infrastructure to reduce risks.

Even with these adjustments, Microsoft continues to invest heavily in AI-driven services. CoreWeave, on the other hand, will need to address its delivery challenges and prove to investors that it can sustain its growth. As the company moves closer to going public, its response to these setbacks will be closely watched.