Key takeaways:
- BitDesk has been selected as the preferred cloud service provider for artificial intelligence cloud services powered by Nvidia chips.
- Cryptocurrency mining machine manufacturer Canaan wants to create a part of its business to make chips for artificial intelligence.
Author: Warren Young
What do you do with your business model after the recent cryptocurrency boom has cooled? In this case, artificial intelligence (AI) has set its sights on the next hot spot. At least that's what the two cryptocurrency-related companies we follow, Canon Inc. CAN and Bitdeer Technologies Holding Co.. This is the latest trend of BTDR .
The recent performance of each of these companies appears very cautious after experiencing fluctuations in the value of digital assets. These measures seem relatively simple compared to the drastic changes many Chinese companies went through when their first businesses burned down.
Last Thursday, cryptocurrency mining platform Bitdeer announced the launch of an artificial intelligence cloud service with major NVDA chipmaker Nvidia. As part of this partnership, Bitdir will become a preferred cloud service provider in Nvidia's partner network, meaning that Bitdir's Singapore data center will be one of the first AI cloud service providers equipped with an "Nvidia product".
And in its latest quarterly earnings report two days ago, Canaan, one of the world's largest bitcoin miners, briefly mentioned that it was undergoing an internal restructuring to spin off its AI business into an independent company. In the company's earnings call, management said it was also looking at creating an AI unit that could raise its own funding. In addition to its core business of manufacturing cryptocurrency machines, Canaan also develops chips for artificial intelligence applications.
"In recent months, we have strategically discussed the future of our AI business in light of the important changes taking place in the AI industry," said Zhang Nanning, CEO of Canaan. "Given the current industry and marketing environment, we believe that the development of our AI business should take a more specific, independent and long-term direction."
Both companies' efforts to develop AI-related businesses make sense, as revenues from services and products related to hot new technologies can provide them with a good hedge against cryptocurrency markets.
Bitdir already provides hosting services for cryptocurrency mining, which allows it to move computing resources to AI applications, such as cloud services. Also, AI chip development is not based on Kana's core knowledge, which includes detailed knowledge of the chips used in crypto mining machines. Rather than the sweeping overhauls that Chinese tech companies sometimes undergo, these changes are often related to their core businesses as they struggle to survive in difficult times.
The two China-related crypto miners, The9 NCTY and BIT Mining BTCM, are the result of these radical changes, the former is a gaming operator and the latter is an online lottery ticket seller.
Crypto winter
Any company in the digital asset ecosystem understands the importance of business diversification during the long crypto winter, even with the recent coin boom. Kana's latest quarterly results clearly show this cold reality. According to the latest results, third quarter revenue fell 77% year-over-year to $33 million due to the sale of mining equipment.
The company has its own mining business, which was temporarily shut down to comply with new regulations in Kazakhstan, and revenues from this business also fell due to a breach of contract by a project partner in the United States.
Even though Canaan's revenue was down, its revenue fell at a slower rate of 30%, partially offset by lower inventory levels and prepaid expenses. And operating costs have really increased. As a result, Canaan was in the red in the third quarter, with a slight net gain from a year ago.
Bitdir was better. According to quarterly results published last month, annual revenue rose nearly 14% to $87.3 million in the period, using more computing power to produce virtual coins and increasing hosting capacity. Even though the net loss has been significantly reduced, the company is still in the red.
The latest bright spot for both companies is the rally in digital tokens. The price of Bitcoin, the flagship cryptocurrency, has risen more than 150% this year as optimism grows that current price levels are sustainable. There are a number of plausible explanations for the rise in prices.
In a first, the US Securities and Exchange Commission (SEC) could approve the first Bitcoin exchange-traded fund (ETF), which many believe could be a game-changer in providing the official investment regulator for the virtual currency. the product Additionally, an event known as the Bitcoin Halving that will take place next year will help increase the value of the currency by reducing the number of new Bitcoins entering the market.
A rise in the value of Bitcoin and other cryptocurrencies could increase the fortunes of Bitdeer and Canaan, which could lead to other sources of income, such as the development of AI-related products to prevent future cryptocurrency mishaps.
Despite all the bullishness in cryptocurrency markets, Canaan's management struck a cautious tone in its latest earnings announcement.
"I think the fourth quarter is showing signs of improvement over the third quarter," said Clark Susi, Canna's director of investor relations. However, price increases and (trading) volumes should not be expected to happen quickly. Based on the general situation mentioned above, we present a very conservative forecast for the fourth quarter of 2023.
This caution is perhaps necessary given the well-documented history of volatility in cryptocurrency markets. Currently, BitDeer and Canaan's revenue is dependent on their business secrets, meaning they each have a long way to go in the early stages of their diversification.
Canaan stock's price-to-sales (P/S) ratio is just 0.6. BitShares is higher, but less impressive, at around 1.8, although the share price rose after the Nvidia partnership announcement. A sure way for both companies to increase their valuations in the long run is to reduce their exposure to virtual coins, and moving to AI seems like a good move to achieve this.