Hive Blockchain Technologies (TSXV:HIVE) stock has been riding volatility for years. After losing 91% of its value in the 2022 crypto bubble burst, the stock has jumped 315% year to date. HIVE surged 108% in just one month due to a rise in the BTC price and its move into generative artificial intelligence (AI).
Hive’s business at a glance
Hive earns money by selling the Bitcoin it mines and validating transactions. The company built data centres in cold regions like Iceland, Sweden, and Canada to mine currencies. These data centres are powered by renewable energy and cooled naturally in cold environments.
Hive makes windfall gains in a crypto boom and uses that money to survive crypto busts. It was seeking to monetize its data mining centres and exploring various options like AI, rendering, and other blockchain applications. And then came ChatGPT, an AI that could generate its own content, image, presentations, and codes. Generative AI needs to be trained on a dataset and significant computing power for training and rendering it into content. All tech companies are rushing to adopt or create their generative AI models. Nvidia’s graphics processing units (GPUs) excel in powering generative AI.
Hive’s entry into digital technologies
Hive pounced upon the ChatGPT frenzy and opened its Nvidia GPU-powered data centres to companies looking to train their generative AI models. It even renamed the company Hive Digital Technologies in July, opening a new growth chapter for the crypto mining company.
The new company offers data centre infrastructure and cloud services to power Web3, AI, and HPC projects. Web 3.0 is a new phase of the world wide web that incorporates decentralization, blockchain technologies, and token-based economics. While Web 3.0 is still in development, it has the potential to change the way the digital world works.
By lending its data centre power for a fee, Hive plans to optimize the use of its data centres after suffering a blow from the Ethereum Merge. The merge changed Ethereum mining to proof-of-stake, which doesn’t need high-power computing, freeing Hive’s Ethereum mining data centre capacity.
As for BTC mining, it is becoming increasingly difficult and costly to mine BTC because of the way it is constructed. Only 21 million BTCs can be mined, of which 19.4 million have already been mined as of May 7. After a certain period, the number of BTCs that can be mined halves, and the next halving is expected in 2024. Because of this halving, it will take a century to mine all 21 million BTCs.
While BTC continues to be a significant part of Hive’s revenue, the Cloud business will bring stable revenue and make the stock less volatile.
Behind the 108% surge in Hive’s stock price
While the new revenue stream was one factor that drove Hive’s stock up 108%, the other factor was momentum in the BTC price. Black Rock and Fidelity applied to the regulator to create a Bitcoin ETF in June. The interest of such large investment bankers in Bitcoin as an alternative investment once again revived confidence and drove the BTC price.
Investors perceive BTC as digital gold with a store of value that can hedge against inflation. But the volatility in the adoption of crypto and dwindling investor confidence prevents BTC from hedging inflation.
Is it a buy today?
Is now the time to buy Hive? I would say, no. It is oversold at the moment and will likely fall as high inflation and interest rates make investors conservative towards risky stocks.
The right way to make money from this volatile stock is active investing. Hive is a good stock to buy at $4 and sell at its small peaks of $8–12. And only invest the money you are willing to lose in Hive stock, given its high risk. I would invest around 3–5% of my portfolio in Hive stock for asset diversification.
Otherwise, I would invest a significant portion in fundamentally strong growth stocks like Descartes Systems that enjoy resilient demand. Its supply chain management solutions cater to a wide customer base across verticals and generate steady revenue and profit growth.
