Summary HIVE's pivot to AI has been underwhelming, with minimal revenue and an inability to compete with giants like Amazon and Microsoft. Management's expectations for the Yguazú facility in Paraguay are overly optimistic; HIVE's projected 3% network hashrate is unlikely due to rising competition. HIVE's perpetual share dilution and volatile stock price make it unattractive for long-term investors, despite potential short-term gains from Bitcoin price spikes. I recommend avoiding HIVE for long-term investments, as Bitcoin mining remains inconsistent and unprofitable, with HIVE's core business valued as essentially worthless. It's been a while since I last wrote about HIVE Digital Technologies Ltd. ( HIVE ) . In my last article, I was quite skeptical about HIVE's pivot to AI, as the company was a minnow in the land of giants like Amazon ( AMZN ), Microsoft ( MSFT ), and Alphabet (GOOG) ( GOOGL ) when it comes to serving AI workloads. So far, it appears my skepticism was not misplaced, as HIVE's stock price has nearly halved since September 2023, while the rest of the market has soared (Figure 1). Figure 1 - HIVE has plunged while the markets have soared (Seeking Alpha) However, in recent weeks, HIVE has been hyping its acquisition of the Yguazú site in Paraguay, which the company believes will catapult it to be one of the largest Bitcoin miners in the world (Figure 2). Figure 2 - Yguazu set to catapult HIVE to be one of the largest miners ( HIVE Presentation ) Is Yguazú truly transformational, and will it boost HIVE's stock price in the coming quarters? In my opinion, management's Yguazú projections are too optimistic. Even if fully built out, HIVE will unlikely command 3% of network hashrate, as the rest of the market will also add capacity. Furthermore, it will take tens of millions in capital to build out Yguazú and acquire the ASICs. This will mean tens of millions of shares will need to be issued, diluting shareholders. Overall, I continue to view Bitcoin mining as a mug's game that does not lead to consistent profits. While short-term traders may be able to profit from periodic squeezes on HIVE's stock, long-term investors should stay away. Brief Company Overview First, since it has been a while since I last analyzed the company, it may be worthwhile to refresh my understanding of HIVE's operations and capabilities. HIVE's core business remains its Bitcoin mining operations, which currently operate at 6 Exahash/s ("EH/s") (Figure 3). Figure 3 - HIVE's footprint ( HIVE Investor Presentation ) HIVE also has a nascent high-performance compute ("HPC") business that serves up AI workloads in 3rd tier datacenters using NVIDIA GPUs (Figure 4). Figure 4 - HIVE has a nascent HPC/AI business ( HIVE Investor Presentation ) Looking through HIVE's recent financial reports and presentations, there are 3 yellow flags that I want to caution readers about. HPC Still A Rounding Error First, readers may recall in my prior note that I was highly skeptical of HIVE's pivot to high-performance computing ("HPC") since the company simply cannot compete with the AI giants like Amazon and Microsoft in their access to capital, NVIDIA chips, and client workloads. Sure enough, more than a year after the HPC business launched, HIVE has recorded a mere $7 million in HPC revenues, or $9.3 million annualized, for the 9-months ended December 31, 2024 (Figure 5). Figure 5 - HPC has been a dud so far (Company Reports) This is an insignificant rounding error compared to outsourced HPC leaders like CoreWeave ( CRWV ), which recorded $1.9 billion in 2024 revenues. In my opinion, the problem with HIVE's HPC business is its lack of scale and access to bleeding-edge chips. Of the company's fleet of 4,096 GPUs, HIVE only has 96 NVIDIA H100 GPUs in operation that are comparable to those from the market leaders. The rest are outdated legacy NVIDIA A-series GPUs (approximately 2,500 A40s, 250 A6000s, and 1,250 A5000s) that are not in demand. HIVE has a 'chicken-and-the-egg' problem. Without access to large amounts of capital, HIVE cannot buy enough chips to attract blue-chip clients like Microsoft (who leases capacity from HIVE competitors like CoreWeave). Is Paraguay The Future? Moving on, HIVE has been promoting its acquisition of Bitfarm's Yguazú facility in recent months. According to company reports, Yguazú will allow HIVE to leapfrog some of its peers to become one of the largest Bitcoin miners in the world by September 2025 (Figure 6). Figure 6 - HIVE set to grow to 25 EH/s ( HIVE Investor Presentation ) In fact, HIVE posted a slide in its latest investor presentation that suggests the company can generate upwards of $330 million in annualized mining margin once the 25 EH/s in capacity is ramped up, assuming Bitcoin prices of $100k (Figure 7). Figure 7 - Illustrative Bitcoin mining margins ( HIVE Investor Presentation ) However, I believe these figures by HIVE may be too optimistic. For example, Figure 7 assumes HIVE mines 13.5 Bitcoins per day at 25 EH/s since HIVE controls 3% of the global network hashrate (~833 EH/s). Unfortunately, we know Bitcoin network hashrates are constantly rising. For example, just in the last twelve months, the Bitcoin network hashrate has increased from 586 EH to 839 EH, or an increase of 43% (Figure 8). In the past 3 years, network hashrates have increased at a 60% CAGR. Figure 8 - Bitcoin network hashrate is constantly rising (blockchain.com) Therefore, it is highly unlikely that network hashrates will stay constant at 833 EH/s until CQ3/25 while HIVE builds out the Yguazú facility. In fact, just looking at the public competitors in Figure 6, cumulative capacity is expected to increase by 95 EH by CQ3/25! Assuming capacity increases at a 45% annualized rate, the network hashrate would be ~1,000 EH/s by CQ3/25, which means HIVE's market share is likely going to end up at 2.5% and falling by the time Yguazú comes online. So the number of Bitcoins mined per day by HIVE should be ~20% lower, and its cost to produce a Bitcoin should be ~20% higher. Furthermore, even when the facility is built out, HIVE still needs to buy the ASICs to mine Bitcoins. With a depleted cash balance of only $9.8 million (excluding its digital assets that are HODL'ed), how will HIVE finance its acquisition of mining equipment (Figure 9)? Figure 9 - Abbreviated HIVE balance sheet (Company Reports) Perpetual Issuing Machine In my opinion, one of the main reasons HIVE's share price keeps plunging lower and lower is because the company, like many of its peers, is in perpetual fund-raising mode. In the past year alone, HIVE's share count has increased from 86 million to 119 million shares, or a 38% dilution (Figure 10). Figure 10 - Bitcoin miners are perpetual dilutors ( HIVE Investor Presentation ) With management constantly "hitting the bid" using at-the-market ("ATM") issuances, it is hard for the stock to make any kind of positive moves. Who Trumpets Volatility? Finally, one slide from HIVE's presentation that I take particular issue with is Figure 11, which trumpets the stock volatility. Figure 11 - HIVE trumpets its volatility ( HIVE Investor Presentation ) Management seems to take pride in the fact that HIVE's shares have volatility (measured as the standard deviation of its price moves) more than twice that of Bitcoin. However, it is important to note that volatility is not the same as value . Bitcoin, for all its volatility, has generally delivered positive returns over the past 2 years, rising from a low of ~$18k to over $100k, before its recent pullback to $88k (Figure 12). Figure 12 - Bitcoin vs. HIVE (Author created using stockcharts.com) HIVE, on the other hand, is trading at roughly the same stock price from 2 years ago, despite Bitcoin more than quintupling, which should have theoretically boosted its margins. Risk To Being Cautious HIVE In my opinion, HIVE, and its Bitcoin mining peers, are perpetual money-losing enterprises that are best avoided. However, I would not short its shares either because of the short-squeeze risk. In particular, the company's valuation has dropped to low enough levels that it may rally strongly if Bitcoin prices were to rise suddenly. This is because HIVE holds on its balance sheet over 2,800 Bitcoins, which is worth close to $250 million at today's prices (Figure 13). Figure 13 - HIVE holds 2,800 Bitcoins in treasury ( HIVE Investor Presentation ) This is roughly the same as the company's Enterprise Value, which means the equity markets deem HIVE's operations as essentially worthless (Figure 14). Figure 14 - HIVE valuation (Seeking Alpha) Take the MSTR/GME Strategy Route In my opinion, what management should do is shut down its operations, fire all of its employees, and convert into a quasi-Bitcoin hedge fund like MicroStrategy ( MSTR ). MicroStrategy has been hugely successful in issuing zero-coupon bonds to buy Bitcoins, boosting its valuations in the process and creating a modern 'perpetual motion machine'. If HIVE announces such a conversion, I expect its share price will react very positively, similar to how GME shares got a large temporary boost when it announced a similar strategy change a few days ago. Conclusion Revisiting HIVE after more than a year, I find there is little to get excited about the company's shares. So far, the company's pivot to HPC/AI has been a dud, delivering less than $10 million in ARR in the red-hot AI market. In its core Bitcoin mining business, the much-hyped Yguazú acquisition may be less than it appears on paper. Building out Yguazú and bringing capacity to 25 EH/s will take tens of millions in capital, which will come from the issuance of tens of millions of shares. Even if HIVE boosts its hashrate to 25 EH/s, the company will unlikely command 3% of the Bitcoin network hashrate as management predicts, since its competitors are also busy adding capacity. Overall, I continue to believe Bitcoin mining is a mug's game that does not lead to consistent profits. In fact, equity investors are essentially valuing HIVE's core businesses as being worthless. In the short-term, HIVE's shares may squeeze higher if Bitcoin prices were to rise sharply. However, I continue to recommend long-term investors avoid HIVE.
