An attempt at salvation through artificial intelligence
Companies building Digital Asset Treasuries (DAT) are turning toward the artificial intelligence (AI) sector in an attempt to restore investor confidence. This strategy follows a sharp crash in their stock market prices, but so far it is not yielding the expected results, Bloomberg reports.
Many of these companies use their own balance sheets and capital raised through stock sales to buy cryptocurrencies. Last year, this model was extremely successful, with their stock prices often growing faster than the value of the assets themselves. However, the downturn in the crypto market has changed the dynamics – in the US and Canada, DAT companies have reported an average decline of 43% since the beginning of the year.
Examples of market decline and pivoting
One of the most notable examples is K Wave Media Ltd., which, after pivoting to data centers in May, suffered a 71% drop in its stock value. Lixte Biotechnology Holdings Inc. also lost 33% of its market value following a decision to merge with a battery manufacturer in June. AlphaTON Capital Corp., renamed Alpha Compute Corp. in April, also reports a 33% loss.
Even the pioneer of this model, Strategy Inc. (popularized by Michael Saylor), has suffered a significant decline of 81% from its peaks, while gradually reducing its Bitcoin holdings. Similar transformations are being observed in other firms, such as footwear manufacturer Allbirds Inc., which is renaming itself Smartbird Inc. in order to enter the AI infrastructure space.
Why is the AI sector being sought?
The attraction of capital to computing infrastructure is supported by massive investments from tech giants such as Alphabet, Microsoft, OpenAI, and Anthropic. Companies related to data centers are among the best performers in the S&P 500 index. This year, the ten fastest-growing companies in the index produce products for data centers, such as SanDisk (with over 500% growth), Dell Technologies, Intel, and Micron Technology.
In contrast, cryptocurrencies are reporting significant declines: Bitcoin is 49% lower compared to its peak last October, and Ethereum has lost 38% since the beginning of the year.
Expert opinions
Tufic Adluni, managing partner at Renno & Co LLC, notes that interest in AI is enormous and companies are heading where they see potential for success, but adds that many of them "are either completely changing direction or are in the process of disappearing."
Gregory Sichenzia, founder of Sichenzia Ross Ference Carmel LLP, points out that the very term "DAT companies" is already deterring investors. He reports that since October, his firm has not received inquiries for such placements, and companies are looking for opportunities in fields such as space technology and small modular nuclear reactors.
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Daniel Forman, partner at Lowenstein Sandler LLP, believes that the model of companies building crypto reserves, in its known form, is already "history," although interest in other applications of blockchain technology still exists.