Why Cipher Mining Stock Gained 10.3% This Week
Key Points
Cipher Mining stock gained 10.3% this week while Bitcoin fell 7.2%, breaking their usual correlation.
The company signed a 10-year artificial intelligence (AI) hosting agreement with Google-backed Fluidstack.
Despite the impressive rally, Cipher Mining trades at 43 times sales and remains deeply unprofitable.
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By the end of Thursday, Oct. 16, shares of Cipher Mining (NASDAQ: CIFR) had gained 10.3% from last Friday's closing bell. According to data from S&P Global Market Intelligence, the crypto-mining stock showed a weekly gain of 24.7% earlier in the day.
It should be noted that Bitcoin (CRYPTO: BTC) fell 7.2% over the same period. Cipher usually moves in tandem with the largest cryptocurrency, because mining new Bitcoins is the company's core business. What's different this week, then?
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When your crypto miner discovers a side hustle in AI
Cipher's recent jump looks like sustained momentum from a larger trend. Cipher's stock has gained a jaw-dropping 282% over the last two months, starting with a strong mining report and boosted by a large contract unrelated to crypto-mining operations.
Image source: Getty Images.
On Sept. 25, Cipher signed a 10-year deal with Fluidstack, an artificial intelligence (AI) system-training specialist that has financial backing from Alphabet's Google division. Cipher's stock soared more than 10% that day and largely continued to rise since then. I guess it takes time to digest news of this beefy caliber.
Three revenue streams are better than one (maybe)
Cipher is diversifying its data center operations, adding AI-training services to its Bitcoin mining systems. The company also resells excess power when that's a more profitable use of these resources than the AI and Bitcoin businesses. Even so, Cipher continues to add hardware to its Bitcoin mining rigs, driving a 51% year-over-year increase in Bitcoin production in August.
I like this flexible business plan, ready to capitalize on two different high-growth operations as market conditions change. At the same time, Cipher's stock is incredibly expensive at 43 times trailing sales. The company remains deeply unprofitable and sells about 16% of its mined Bitcoin in order to pay the bills. It's not my favorite Bitcoin mining stock right now.
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Anders Bylund has positions in Alphabet and Bitcoin. The Motley Fool has positions in and recommends Alphabet and Bitcoin. The Motley Fool has a disclosure policy.
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