Hive Digital Technologies Pivots to High-Performance Computing Services

Hive Digital Technologies (HIVE) is strategically shifting from its origins as a cryptocurrency miner to become a leading provider of High-Performance Computing (HPC) services, driven by a focus on emerging artificial intelligence (AI) workloads.

Originating with a modest operation managing just 400 GPUs and two employees, the company is now scaling towards generating $100 million annually in HPC-related revenue. This expansion leverages advanced AI accelerators, including NVIDIA’s H100 GPUs and the upcoming Blackwell architecture chips.

Co-founder and Executive Chairman Frank Holmes, along with CEO Aydin Kilic, detailed the company’s transformation strategy in an exclusive interview with Cointelegraph, which occurred during the company’s closing bell ceremony at the Nasdaq Stock Exchange in New York City on Thursday. Mining companies, like Hive, recognized that, compared to Bitcoin mining efficiency measured by kilowatt-hours, and especially against the declining profitability post-2024 halving, applying AI processing offers significantly higher potential returns. This realization spurred the diversification into AI infrastructure.

According to Holmes, Hive pioneered the publicly traded miner’s pivot into HPC services back in 2022. HPC revenue officially appeared on the company’s income statement in Q2 2023 and has since grown to an annual recurring revenue (ARPA) run rate of $20 million. The objective is to achieve a $100 million run rate by 2026.

However, scaling HPC operations presents challenges, notably the “electricity and land crunch.” Kilic highlighted this constraint.

To strategic capacity expansion, Hive recently acquired an industrial facility near Toronto Pearson International Airport in Canada. This acquisition positions the company to scale power usage to up to 7.2 megawatts (MW). The choice of Toronto was deliberate, placing Hive within proximity to the University of Toronto and Canada’s thriving AI talent pool, offering long-term strategic advantages.

Despite this industry pivot, Hive maintains its Bitcoin operations. Even with the shift towards higher-margin HPC, the stock has exhibited characteristics typical of a Bitcoin “proxy” or ‘mining tech’ stock, limiting valuation upside potential, as noted by Kilic. The stock, after ringing the closing bell, saw a modest gain and had recovered to a 31% increase over the previous month. However, year-to-date performance remains down by 27%, trading near $2.23P with a market cap of approximately $475 million.

Stock Resilience Despite Volatility

Despite the volatility, analysts generally maintain a positive outlook on Hive’s stock. Earlier this year, H.C. Wainwright assigned a “Buy” rating and a $10 price target. Canaccord Genuity recently reaffirmed its “Buy” rating with a $9 price target.

Meanwhile, Rosenblatt Securities analyst Chris Brendler highlighted Hive’s expanding HPC portfolio and operational growth in its Paraguay data center, recently acquired from Bitfarms for $85 million. Kilic described the Paraguayan site as a long-term investment, lauding its low-cost hydro power, political stability, and governmental support.

Bitcoin Mining as an Enduring Core Asset

While clearly diversifying beyond Bitcoin mining, Hive still views BTC as a crucial, core strategic long-term asset. Following HRG’s CDN trading post the closing bell ceremony, the stock registered a small gain and had climbed 31% in the preceding month, though its YTD performance remains negative at 27%, trading around $2.23 with an ~$475M market cap.