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Bitdeer and Canaan Pivot to AI Amid Crypto Volatility

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The Big Shift:

  • Bitdeer grabs the spotlight as a top cloud services provider for artificial intelligence cloud services.
  • Canaan announces plans to establish a standalone unit for developing chips for AI applications.

By Warren Yang

So you thought traditional miners were the only ones shifting from the gold rush once the nuggets run dry? Think again! The heat is on for two cryptocurrency-related companies, Canaan Inc. CAN and Bitdeer Technologies Holding Co. BTDR, as they turn their attention to the alluring world of artificial intelligence (AI). Yes, itโ€™s adieu crypto, bonjour AI!

Eager to leave behind the rollercoaster of digital assets, these companies are sticking a foot in the door of the AI realm. Their moves could be perceived as relatively modest considering the grand overhauls often seen at Chinese tech firms floundering in rough seas. It seems Canaan and Bitdeer are taking a more sensible approach to staying afloat as their original business falls on hard times.

Bitdeer recently announced a partnership with powerhouse chipmaker Nvidia NVDA to launch an AI cloud service. As part of the deal, Bitdeer will become a preferred cloud service provider in Nvidiaโ€™s partner network, with its Singapore data center leading the way as one of the first to offer AI cloud services powered by Nvidiaโ€™s prized product.

Meanwhile, Canaan, known for its Bitcoin mining machines, hinted at a restructuring to separate its AI business as an independent operation. The companyโ€™s CEO, Zhang Nangeng, elaborated on this strategic move, highlighting the current industry climate and marketing environment as key drivers for a more defined, independent, and long-term approach to its AI venture.

These forays into AI just make sense, donโ€™t they? With crypto markets roller-coastering, developing AI-related businesses could offer a pretty solid hedge. Bitdeerโ€™s experience in hosting crypto mining services means it can easily repurpose its computing resources for AI cloud services. On the other hand, Canaanโ€™s prowess in manufacturing chips for its crypto mining machines puts it in a prime position to dabble in AI-specific chip development. These shifts are far more aligned with their core competencies compared to the drastic transformations seen at other Chinese tech companies.

Take The9 NCTY and BIT Mining BTCM, for example, both products of radical makeovers that saw them swing from game operators to crypto miners, and from online lottery ticket sellers to Bitcoin miners. Oh, the lengths companies will go to in the quest for survival!

The Cold Hard Crypto Reality

Amid the prolonged crypto winter, any company in the digital asset space understands the need for business diversification, and Canaanโ€™s latest earnings are the textbook example. The companyโ€™s revenue nosedived a whopping 77% year-on-year to a measly $33 million in the third quarter, largely due to plummeting sales of its mining machines.

Meanwhile, Canaan also saw a sharp decline in its mining business revenue, thanks to a temporary shutdown in Kazakhstan and a contract breach by a U.S. project partner. As a result, Canaan ended up plunging into the red in the third quarter after a small net profit the year before.

In stark contrast, Bitdeer managed to pull off a 14% year-on-year revenue growth to hit $87.3 million by ramping up its computing power for virtual coin production and expanding its hosting capacity. Though it still found itself in the red, its net loss did narrow substantially. And both companies have been eyeing the crypto marketโ€™s recent rally, hoping it marks a sustainable period where they can rake in future profits, thus fueling the development of their AI-related ventures.

From the potential approval of the first spot bitcoin exchange-traded fund (ETF) by the U.S. Securities and Exchange Commission (SEC) to the forthcoming bitcoin halving event next year, there are a myriad of factors fueling optimism in the crypto space. But how long will this euphoria last? And what does the future hold amidst all this crypto mayhem?

The big question looming over both companies is, can they weather the volatility storm? With the lionโ€™s share of their revenue still tied to crypto activities, it seems they still have a long road ahead in their quest for diversification.

As it stands, Canaanโ€™s price-to-sales (P/S) ratio sits at a mere 0.6, while Bitdeerโ€™s hovers around 1.8, even after its stock price soared following news of the Nvidia partnership. The ticket to upping their valuations lies in escaping the tight grip of virtual coins, and their pivot to AI seems like a smart step in the right direction.

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