Last week, Bitcoin’s (BTC-USD) meteoric rise to new all-time highs shifted attention to crypto miner stocks as cryptocurrency inflows rose. Holding crypto miner stocks is seen as another way to profit from a potential ongoing rise in Bitcoin prices.
A simple approach is to invest in crypto-related stocks that will likely report higher profits as Bitcoin’s price rises. Another way to gain indirect exposure to Bitcoin while mitigating some risks is through crypto mining suppliers.
As Bitcoin’s price surged, demand for crypto miner stocks grew, as measured by increased energy usage. Bitcoin mining stocks have also outperformed, as many companies issue new shares to finance the purchase of new mining rigs. Therefore, suppliers to Bitcoin miners, such as Application-Specific Integrated Circuit (ASIC) manufacturers, rig developers, and graphics/processor makers, could experience demand growth if Bitcoin’s price remains high or increases further.
For this purpose, we have compiled a list of three crypto miner stocks that are likely to profit more from the Bitcoin boom.
Canaan (CAN)
Canaan (NASDAQ:CAN) is the first pick of our crypto miner stocks. It specializes in manufacturing blockchain servers and ASIC microprocessors used to mine Bitcoin. It also ships its own brand of Bitcoin mining rigs. Based in Singapore, it has an extensive customer base in Southeast Asia.
In Q4, CAN saw a 46% increase in total hashrate sold and almost tripled its sales from the prior year. However, the company reported a net loss due to inventory write-downs, spooking investors and sending its stock price down 23%. Regardless, analysts remain optimistic about Canaan’s future, with an average target price of $2.75, nearly doubling the current price of $1.34. In addition, the company seems to have enough cash to cover all its debt, and it does so while being close to a 5-year low.
Aside from the crypto business, the company has recently integrated new chips for video Artificial Intelligence (AI) applications, allowing device vendors to develop innovative products and further diversify away from sole reliance on seasonal crypto miner revenue.
Advanced Micro Devices (AMD)
Nvidia’s (NASDAQ:NVDA) expertise in AI has quite eclipsed Advanced Micro Devices (NASDAQ:AMD), which is now often considered merely a rival graphics card manufacturer instead of an independent CPU brand. While AMD continues to play catch-up in AI, it is considered one of those crypto miners stocks poised to benefit from rising demand for AMD processors.
Past price action suggests that crypto miners rushed to purchase AMD’s Ryzen 3000 and 5000 series when cryptocurrency prices increased. This trend could resurge, especially given rumors that AMD’s upcoming Zen 5 CPUs may be twice as effective for crypto mining.
AMD’s stock price pulled back from all-time highs earlier in the month to trade at a price-to-earnings (P/E) ratio of 360x. However, most analysts still recommend holding or buying the stock. AMD has performed well lately, with analysts expecting continued earnings and revenue growth. Rising demand could be the catalyst to justify a higher stock valuation for this crypto miner stock.
Taiwan Semiconductor Manufacturing (TSM)
As the world’s largest semiconductor manufacturer, it would be remiss not to include Taiwan Semiconductor Manufacturing (NYSE:TSM) in our crypto miner stocks lists. The crypto-mining industry relies heavily on semiconductors, and TSM’s processors are the main components powering many of the most popular Bitcoin miners. This positions TSM to benefit from the tailwinds in crypto miner stocks as miner components have seen explosive demand growth alongside the rising Bitcoin price.
While AI has been a major news driver for TSM’s role in semiconductors, along with its geopolitical position with China, crypto mining accounts for a greater portion of TSMC’s overall AI revenue of just 6%. Despite surging over 110% on investor excitement around AI, TSM still trades at a relatively modest P/E ratio of 27.2x versus its peers. With margins expected to continue expanding along with earnings estimates, crypto mining could serve as a core growth engine for TSM over the coming years, supported by only a $5 billion grant from the U.S. for its new Arizona plant.
On the date of publication, Stavros Tousios did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
