Core Scientific (CORZ), a prominent Bitcoin miner, is on the verge of making a significant impact in the artificial intelligence (AI) hosting space, according to a report by Canaccord. The financial firm initiated coverage on the company with a “buy” rating and set a price target of $16 per share. Core Scientific’s stock saw a 1.4% increase, trading at $12.15 in early Monday trading.

A key factor driving this optimistic outlook is a 12-year contract that Core Scientific signed with CoreWeave, a major hyperscaler, in June. Canaccord describes this agreement as a pivotal development, marking the first “mega deal” by a Bitcoin miner to offer high-performance computing (HPC) data center hosting services. Hyperscalers, like CoreWeave, are large-scale data centers that provide vast amounts of computing power, often used for AI and other data-heavy applications.

Canaccord analysts, led by Joseph Vafi, outlined three primary factors that are expected to boost Core Scientific’s stock: increasing revenue from its AI hosting services, improved cash flow, and the likelihood of acquiring more data center sites. The firm sees the company’s expanding AI hosting capabilities as a key driver for its future growth.

The $16 price target is broken down into three parts: around $12 is attributed to the CoreWeave contract, $3 to the company’s power supply allocated for AI hosting, and about $1 to its Bitcoin mining operations.

Although Core Scientific is shifting a significant portion of its resources toward AI, it still has considerable potential in Bitcoin mining. The company retains approximately 230 megawatts (MW) of power for Bitcoin mining, even after repurposing nearly 500MW for its growing AI hosting services. This dual focus on AI and Bitcoin mining gives the company substantial growth opportunities in both sectors, according to Canaccord’s analysis.

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