Valued at a market cap of $685 million, Nano Labs (NA) is a fabless integrated circuit design company and product solution provider. Founded in 2019, Nano Labs is a China-based company that develops computing chips and offers distributed computing and storage solutions, smart network interface cards, and vision computing chips.
Nano Labs went public in July 2022 and currently trades 91% below all-time highs, trailing the broader markets by a wide margin. However, NA stock has experienced strong upside momentum in recent trading sessions, now up 145% over the last month after it announced plans to purchase $50 million worth of Bitcoin (BTCUSD) over the next five years. In a press release, Nano Labs explained, “This strategic decision underscores the company's confidence in BTC as a long-term store of value and a foundational asset within the rapidly evolving Web 3.0 ecosystem.”
According to Nano Labs, Bitcoin will play a pivotal role in the digital asset ecosystem driven by widespread institutional adoption and favorable policy shifts. Nano Labs further claimed that incorporating Bitcoin will strengthen its market position while contributing to the adoption and growth of the digital economy.
Is Nano Labs the Next MicroStrategy?
Nano Labs isn’t the first publicly listed company to have Bitcoin on its balance sheet. In fact, MicroStrategy (MSTR) is the largest institutional holder of the cryptocurrency, with 402,100 BTC purchased at an average price of $58,263. Several other companies, such as Tesla (TSLA), Coinbase (COIN), and Block (SQ), also hold Bitcoin as a strategic financial reserve.
Bitcoin has been on an absolute tear, rising close to 600% since the start of 2023. It recently surpassed the $100,000 threshold and is currently valued at a market cap of $2 trillion, making it the seventh-largest asset in the world.
Allocating resources to Bitcoin would make Nano Labs a Bitcoin proxy, meaning Nano's share price will align with BTC prices. For instance, MSTR stock fell 80% during the Bitcoin bear market of 2022. However, over the last two years, it has surged over 1,900%.
Notably, Nano Labs was on the verge of being delisted from the Nasdaq, as it could not meet the minimum bid price compliance requirements. While it has regained compliance, relying on BTC as a strategic reserve may seem like a diversion from its core business and weaken investor confidence.
Is NA Stock Undervalued?
While several chip stocks are trading near all-time highs, Nano Labs has struggled to capitalize on the artificial intelligence (AI) megatrend, leading to sluggish customer demand and weak financial performance.
Its decline in sales indicates issues related to the product lifecycle of current offerings, which are legacy-based and impacted by competition. The company has started mass-producing its Cuckoo 3.0 chip, but these products are not currently contributing to top-line growth.
In the last 12 months, Nano Labs has reported revenue of $50.8 million, down 92% year over year. Moreover, it remains unprofitable, and reported a free cash outflow of $228 million in the last four quarters. Nano Labs ended Q2 of 2024 with $26.5 million in cash, meaning it would have to shore up its profit margins or raise additional capital to fund its BTC purchase.
Given these factors, Nano Labs stock remains a high-risk investment, despite the recent surge in share prices.
