Core Scientific's 30% Drawdown Reveals Why Q3 Believers Got Tested: The Missed Catalyst Problem

The Setup That Looked Right, Then Wrong

When Zurich-based PSquared Asset Management built a 405,800-share position in Core Scientific (NASDAQ:CORZ) during Q3, valued at roughly $7.28 million or 5.78% of the firm’s $125.97 million U.S. equity portfolio, the timing appeared strategically sound. The blockchain infrastructure and digital asset mining company was undergoing a clear transformation narrative: balance sheet stabilization post-restructuring, expanding hosting contracts, and a transformational merger catalyst in CoreWeave that promised to unlock value from the firm’s power-intensive datacenter assets.

The thesis was straightforward—the type that disciplined value investors often pursue. Core Scientific controlled valuable computing infrastructure and was pivoting away from capital-intensive bitcoin mining toward higher-margin colocation hosting and AI-adjacent compute workloads. For a concentrated portfolio, this represented a bet on execution and optionality while sentiment was still rebuilding.

When Catalysts Collapse

Then the merger imploded. In late October, Core Scientific formally terminated its agreement with CoreWeave after shareholders rejected the deal. The market’s reaction was swift and brutal: shares plummeted nearly 30% as the loss of a clear exit catalyst forced investors to reprice the entire narrative. What had looked like a structured path to value realization suddenly reverted to a pure operational execution bet.

The Fundamentals Haven’t Actually Changed

Here’s what makes this drawdown instructive: operationally, almost nothing broke overnight. The company still operates blockchain infrastructure across North America, still controls meaningful power capacity, and is still shifting its business mix toward hosting and compute services. The core thesis around decoupling from pure bitcoin mining remained intact.

The issue wasn’t the business deteriorating—it was the timeline collapsing. Without CoreWeave providing a defined exit, the market moved execution risk back to the center of the investment case. That’s a different beast entirely.

Looking at the Numbers

As of mid-November, Core Scientific traded at $15.29 per share, up 5.5% over twelve months but substantially underperforming the S&P 500’s 15% return in the same period. The company’s financial profile tells a story of transition:

• Market cap: $4.74 billion
• Revenue (TTM): $334.18 million
• Net income (TTM): ($768.31 million) — still loss-making

The negative earnings reflect both legacy restructuring costs and the capital intensity of their datacenter build-out. The cash-generation question—whether colocation hosting margins can offset mining volatility—remains the critical test ahead.

Portfolio Context

PSquared’s top holdings after the disclosure reveal a concentrated strategy favoring industrial and infrastructure plays:

• NYSE: K (Kellanova): $42.77 million (34.0% of AUM)
• NYSEMKT: SLSR (Salarius): $25.04 million (19.9% of AUM)
• NYSE: TECK (Teck Resources): $18.99 million (15.1% of AUM)
• NASDAQ: TASK (TaskUs): $11.34 million (9.0% of AUM)
• NASDAQ: HOLX (Hologic): $8.42 million (6.7% of AUM)

Core Scientific, at roughly 5.78% of assets, fits the pattern: capital-intensive businesses with asymmetric upside optionality—the kind of profile that attracts investors hunting for the next wave of wealth creation through disciplined fundamental analysis and patient capital deployment.

The Real Lesson

PSquared’s position wasn’t wrong at quarter-end—the market conditions simply shifted. Blockchain infrastructure remains strategically important, and Core Scientific’s assets are real. But the difference between a controlled path forward (merger) and pure operational execution is measured in market multiples, not just business metrics. The test now is whether management can deliver on the pivot to profitable hosting services faster than skeptics expect, or whether the company becomes a longer-duration, higher-risk hold that requires genuine faith in the business model rather than a near-term catalyst.