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Canaccord initiated coverage of Core Scientific with a buy rating.
The bitcoin miner is on the cusp of becoming a major player in AI hosting, the report said.
The broker noted that Core Scientific has potential upside from its mining business.
Core Scientific (CORZ) is on the cusp of becoming a major force in artificial intelligence (AI) hosting, broker Canaccord said in a Monday report initiating coverage of the bitcoin (BTC) miner.
Canaccord started coverage of the crypto mining company with a buy rating and a $16 price target. The shares were 1.4% higher at $12.15 in early trading.
A transformative 12-year contract the firm inked with hypersaler CoreWeave in June is a game changer, Canaccord said. The broker views it as the "first and landmark 'mega deal' signed by a bitcoin miner to provide high-performance compute (HPC) data center hosting capacity."
A hyperscaler is a large-scale data center specializing in delivering huge amounts of computing power.
Canaccord identified three positive drivers for the stock: "Ramping revenue in AI hosting, better cash flow and potentially more site acquisitions on the way," analysts led by Joseph Vafi wrote.
The price target comprises about $12 for the CoreWeave contract, $3 for the company's remaining power supply that has been selected for AI hosting and around $1 for the bitcoin-mining business.
The company also has potential upside from mining. It still has about 230 megawatts (MW) of power that can be used for bitcoin mining, even after repurposing almost 500MW for AI hosting, the report noted.
Read more: Bitcoin Mining Profitability Remains at All-Time Lows as Prices Fall, Hashrate Rises, JPMorgan Says