Microsoft Cuts Contracts with Core Scientific's AI Partner, Rattling Investor Confidence

Bitcoin (BTC) miner Core Scientific saw its share price drop 10% on March 5 after Microsoft downsized contracts with CoreWeave, one of the firm's business partners.

Microsoft's decision to reduce contractual commitments tied to Core Scientific's AI partner, CoreWeave, has rattled investor confidence in the Bitcoin (BTC) miner as the tech giant remains a major revenue source.

According to a report by the Financial Times, Microsoft pulled back on some of its contracts with CoreWeave after becoming "dissatisfied" with certain deliveries. Despite this, Microsoft still accounts for 65% of CoreWeave's business and could pay the firm $10 billion for services under a multi-year agreement.

The news comes as CoreWeave announced its filing for an initial public offering. The filing stated that the firm is seeking to raise $4 billion at a $35 billion valuation.

In its S-1 registration, filed with the U.S. Securities and Exchange Commission, CoreWeave noted that "any negative changes in demand" from Microsoft would "adversely affect" its business, finances, and "future prospects."

Earlier this month, Core Scientific and CoreWeave announced a $1.2 billion data center deal to provide high-performance computing services for the latter's artificial intelligence and cloud computing operations.

The partnership came after last year's Bitcoin halving, which forced miners like Core Scientific to seek new revenue sources. With its massive-scale data centers and technological capabilities, CoreWeave began offering HPC services to major AI and other compute-heavy firms, with Microsoft being a primary customer.

Following the news, shares of Core Scientific dropped 10% to trade at $8.32 by Monday morning. Investors also assessed the new risk from Microsoft's pullback and bankruptcy reorganization as the firm concluded its Chapter 11 case.

In December, Core Scientific announced that it hired ex-Morgan Stanley veteran Jim Nygaard to oversee its balance sheet as CFO during this new chapter.