Bitdeer, Canaan Mint Hedges Against Crypto Volatility In AI – BIT Mining (NYSE:BTCM), Bitdeer Technologies (NASDAQ:BTDR)

Key Takeaways:

• Bitdeer stated it was picked as a most popular cloud providers supplier for synthetic intelligence cloud providers powered by an Nvidia chip
• Cryptocurrency mining machine maker Canaan is trying to create a separate unit for its enterprise making chips for AI functions

By Warren Yang

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What do you do with your online business mannequin after the newest scorching pattern in cryptocurrencies goes chilly? You flip to the following scorching space, on this case synthetic intelligence (AI). Not less than that’s the newest strategy coming from two of the crypto-related corporations we comply with, Caanan Inc. (NASDAQ:CAN) and Bitdeer Applied sciences Holding Co. (NASDAQ:BTDR).

After getting burned by gyrations in digital asset costs, the newest forays by every of those corporations seems moderately prudent. Such strikes might even look comparatively average in contrast with drastic enterprise transformations many Chinese language ventures typically endure when their authentic companies come beneath hearth. 

Final Thursday, Bitdeer, which operates a cryptocurrency mining platform, said it will launch an AI cloud service with big-name chipmaker Nvidia (NASDAQ:NVDA), arguably the most well liked title proper now in AI microchips. Underneath the collaboration, Bitdeer shall be a most popular cloud service supplier in Nvidia’s companion community, that means Bitdeer’s Singapore information middle will turn into one of many first suppliers of AI cloud providers powered by an Nvidia product.

And in its latest quarterly earnings report launched two days earlier, Canaan, one of many world’s largest bitcoin mining machine makers, briefly talked about that it’s engaged on an inner reorganization to make its AI enterprise an unbiased operation. On the corporate’s earnings name, its administration elaborated, saying it’s in search of to create a separate AI unit that would even entice its personal financing. Along with its core enterprise making crypto mining machines, Canaan additionally makes chips for AI functions.

“Given the numerous modifications within the AI trade over the previous few months, we now have been strategically discussing the way forward for our AI enterprise,” Canaan CEO Zhang Nangeng stated. “In mild of our present trade and the advertising atmosphere, we consider that the event of our AI enterprise ought to take a extra outlined, unbiased, and long-term route.”

The 2 corporations’ efforts to develop AI-related companies make various sense, since income from providers and merchandise linked to the new rising expertise can present them with a pleasant hedge towards wildly risky crypto markets.

Bitdeer already affords internet hosting providers for crypto mining, so presumably it could actually repurpose its computing sources to make use of for AI functions like cloud providers. Equally, creating AI-specific chips isn’t too removed from Canaan’s primary experience that features detailed data of chips utilized in its crypto mining machines. Such shifts are rather more associated to their core companies than the entire overhauls typically seen at Chinese language tech corporations, typically in determined makes an attempt to outlive tough occasions.

Two China-linked crypto miners, The9 (NASDAQ:NCTY) and BIT Mining (NYSE:BTCM), are the merchandise of such radical transformations, with the previous initially a sport operator and the latter a web based lottery ticket vendor.

Crypto Winter

Any firm within the digital asset ecosystem in all probability understands the necessity for enterprise diversification amid a protracted crypto winter, regardless of a current rally in currencies. Canaan’s newest quarterly outcomes vividly illustrate this chilly actuality. Its income shrank 77% year-on-year to $33 million within the third quarter as gross sales of its mining machines dropped, based on its newest outcomes.

The corporate has its personal mining enterprise as properly, and income from that operation took the same dive due to a brief shutdown in Kazakhstan to adjust to new laws and a contract breach by a challenge companion within the U.S.

Whereas Canaan’s income plunged, its value of income decreased at a far slower fee of lower than 30%, partly as a result of write-downs for stock and prepayments elevated. And its working bills really elevated. As a consequence, Canaan ended up within the crimson within the third quarter, swinging from a small web revenue a yr earlier. 

Bitdeer fared higher. It managed to put up about 14% year-on-year income development to $87.3 million for the interval by deploying extra computing energy to supply manufacturing of digital cash and rising its internet hosting capability, based on its quarterly results launched final month. The corporate nonetheless remained within the crimson, though its web loss narrowed considerably. 

One current brilliant spot for each corporations is the rally for digital tokens. The worth of bellwether cryptocurrency bitcoin is up greater than 150% this yr, with rising optimism that present value ranges are sustainable. There are some compelling explanations for the worth surge.

For one, the U.S. Securities and Change Fee (SEC) might approve the primary spot bitcoin exchange-traded fund (ETF), which many suppose could be a game-changer by giving an official regulatory stamp of approval to a digital currency-linked funding product. Additionally, an occasion often called bitcoin halving, which is predicted to happen subsequent yr, will scale back the quantity of recent bitcoin getting into the market, serving to push up the foreign money’s worth.

An increase in bitcoin and different cryptocurrency costs would in all probability carry the fortunes for each Bitdeer and Canaan, which may plow a few of any future income into creating different income sources like AI-related merchandise to hedge towards future crypto downturns.

For all of the current bullish sentiment in crypto markets, Canaan administration sounded a cautious tone on its newest earnings name.

“I consider that the fourth quarter has proven indicators of enchancment in comparison with the third quarter,” stated Clark Soucy, Canaan’s investor relations director. “Nevertheless, we shouldn’t count on the best-case situation of each rising value and (buying and selling) volumes to occur shortly. Primarily based on the general scenario talked about above, we offer a extremely cautious outlook for the fourth quarter of 2023.”

Such warning might be warranted, given the well-documented historical past of volatility in crypto markets. For the time being, each Bitdeer’s and Canaan’s income are closely reliant on crypto actions, that means every has an extended approach to go of their nascent diversification drives.

Canaan shares at the moment commerce at a price-to-sales (P/S) ratio of simply 0.6. Bitdeer is greater but in addition not so spectacular at about 1.8, even after a leap in its inventory value following information of the Nvidia partnership. The surest manner for each corporations to spice up their valuations in the long run is to scale back their publicity to digital cash, and their strikes into AI seem to be an excellent guess to start out attaining that.