Hive Blockchain Stock vs. Hut 8

Written by Brian Paradza, CFA at The Motley Fool Canada

At a time when ChatGPT is taking the internet by storm, some distantly related cryptocurrency mining stocks are roaring back from 2022 lows. Hive Blockchain Technologies (TSXV:HIVE) shares have risen 153% so far this year, while Cabin 8 Mining (TSX:HUT) stock is up 125% so far this year. The two speculative growth stocks have shown strong recovery momentum during the first quarter of 2023. However, they may not provide a similar return during the rest of this year.

Interestingly, HIVE and Hut 8 shares have a distant relationship with a currently hot generative artificial intelligence (AI) investment theme. In my book, there is a relationship between generative AI like ChatGPT, cryptocurrencies and Web 3.0 or Web3 investment themes.

Generative AI has risen to prominence in 2023, led by the groundbreaking success of Open AI’s ChatGPT: an advanced chatbot that understands human language and generates valuable content. Natural language processing advances and improvements in generative AI’s content quality are bringing the world closer to an interactive and intelligent web – a long-awaited key feature of Web 3.0: the next-generation internet with decentralized content ownership.

Decentralized content ownership is made possible with blockchain technology. Therefore, generative AI and cryptocurrencies combine to create Web 3.0. They are related long-term investment themes centered on the future of the Internet.

Which one should I buy? Hive stock or Hut 8?

After a 153% increase so far this year, Hive Blockchain stock price has shown stronger momentum than Hut 8 stock recently. However, Hut 8’s 125% gain so far this year doesn’t put the more substantial blockchain play far behind. Momentum traders may prefer a more liquid HIVE stock.

They are both cryptocurrency mining companies, whose share prices are anchored on cryptocurrency markets. They act in sync and mimic each other in some way. The recent bottom of cryptos in 2023 has been a significant driver of the two’s strong share price gains of late.

The story continues

However, some important fundamental aspects make HIVE and Hut 8 make different in some ways.

Hive Blockchain

Hive Blockchain incurs a smaller percentage of revenue as fixed operating costs. Total selling, general and administrative (SG&A) expenses accounted for 6-14% of sales over the last three calendar years. This compares better with Hut 8 Mining, whose SG&A amounted to 7.8-25% of annual turnover in the same period.

It appears that Hive may have better breathing room to survive cryptocurrency market downturns; however, something may be wrong. Hive has a significant operating cost recognized under “Other operating costs” for 2022, and the total operating costs were almost 72% of revenue last year if we include share-based compensation. Hut 8’s total operating expenses were below 34% of sales in 2022.

Cabin 8 Mining

Hut 8 is the largest cryptocurrency miner, with a total Bitcoin cache of 9,133 coins by March 31, 2023. The company’s holdings have grown from 9,086 Bitcoin at the end of last year. At this time, Hive Blockchain had 2,372 Bitcoin and had disposed of it Ethereum holdings after ETH’s change to the proof-of-stake concept in September 2022. HUT has better greater Bitcoin upside capacity.

That said, Hut 8’s pending merger with US Bitcoin Corp (USBTC) could be a significant valuation driver. The upcoming merger of equals will transform Hut 8 into a larger, diversified US-domiciled stock. Income volatility may be lower due to reduced currency-induced gains and losses.

The pending merger increases uncertainty in the future, but it may also dampen earnings volatility.

Most notably, Hut 8 has two revenue-generating segments: crypto-mining and high-performance computing. Although high-performance computing revenue represented only 11.2% of total sales in 2022, sales are more recurring and stable. They moderate the overall volatility of Hut 8’s revenues and perhaps earnings, and improve the valuation of the company’s future cash flows.

Hive Blockchain has no recurring hosting revenue anymore.

Investor takeaway

Hive Blockchain shares and Hut 8 are highly volatile cryptocurrency shares suitable for high risk tolerant investors. They act in sync. Just like ChatGPT and today’s hot AI stocks, they are contributing to the building blocks of Web 3.0, the Internet of the future. Your long-term bets may still be rewarded with capital gains as the web of the future unravels. That said, speculative stocks’ high volatility makes them suitable only for high-risk portfolios. They can fuel your retirement plan if you’re still a long way from retirement.

The post Better Buy: Hive Blockchain Stock vs. Hut 8 appeared first on The Motley Fool Canada.

Before you consider Hut 8 Mining Corp., you should hear this.

Our market-beating analyst team just revealed what they believe are the top 5 stocks for investors to buy in March 2023… and Hut 8 Mining Corp. was not on the list.

The online investment service they’ve been running for nearly a decade, Motley Fool Stock Advisor Canada, beats the TSX by 22 percentage points. And right now they think there are 5 stocks that are better buys.

See the 5 shares * Returns as of 3/7/23

More reading

Fool contributor Brian Paradza has no positions in any of the stocks mentioned. The Motley Fool recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.

2023