Cango’s AI Pivot Gets First Customer

The company’s bitcoin mining business held steady in the second quarter, as its first high-performance computing center was ready to receive customers in July image credit: Bamboo Works Key Takeaways: Cango completed its overhaul of a high-performance computing center in Georgia in July, as it signed the first customer for its new AI services The company continues to refine its core bitcoin mining business by phasing out older machines and experimenting with leased capacity First there was the storm. Then there was the post-storm clean-up. Now the rebuilding begins. That sums up the recent turbulent history for Cango Inc. (NYSE:CANG), which, in the space of just nine months has gone from the brink of a liquidity crisis to a herculean effort to right its corporate ship. Its latest financial results show the company’s finances returned to stable footing in the second quarter, as it forged ahead with a new AI-related business model. The company’s latest report, released Aug. 31, contained some important new developments on the AI front, including the signing of the first customer for the high-performance computing (HPC) centers Cango is setting up within one of its existing bitcoin mining facilities. The company also competed an overhaul of a portion of an existing mining center in the U.S. state of Georgia, converting roughly 3 MW of the site’s 50 MW of capacity, positioning it to become its first such operational HPC facility. It should come as no surprise that Cango’s recent turbulence is directly tied to its embrace of bitcoin mining as a business model in late 2024. The company was a car trader in China before that, but ditched that sputtering business in favor of bitcoin mining as the cryptocurrency traded at record highs. But then bitcoin prices crashed starting late last year. The company responded by selling off a big portion of its bitcoin reserves starting in January. It used that cash to pay down its long-term debt, which dropped to $30.6 million by the end of March from $557.6 million just three months earlier. Its latest report showed that long-term debt level remained low, at $31.2 million at the end of June. Going forward, CEO Paul Yu said Cango will continue to run its bitcoin and AI operations as "parallel businesses." But the focus seems to be shifting to HPC centers as bitcoin prices remain stubbornly low, despite a recent rally of more than 20% for the cryptocurrency since the start of July. Cango said the average cost for each bitcoin it mined stood at $73,313 in the second quarter, down 5% sequentially, as the company shifted its mining strategy, which we’ll discuss in more detail shortly. Significantly, that cost is below the latest bitcoin market price of about $77,500, meaning Cango is spending less to mine each coin than the currency’s actual value. But we should also point out the company’s all-in mining cost of $98,405 per bitcoin during the quarter was still well above the market price. "In our bitcoin mining business, we continue to focus on unit economics rather than scale," said Yu. "At the same time, we continued to deliver on our AI modular build at our LN mining site," he added, referring to the company’s first HPC center in Georgia. First customer onboard The Georgia facility is one of dozens of sites on three continents that Cango currently operates, mostly as bitcoin mining facilities. It’s using the Georgia facility as a proof of concept, aiming to show it can host the heavy-duty computing power needed to run AI applications. The network of centers Cango envisions today are well suited for an emerging field of more company- and industry-specific agentic applications that require less power, but it doesn’t not rule out expanding into larger-scale AI inference workloads as its infrastructure and GPU fleet evolves over time. The HPC centers are being operated under Cango’s new EcoHash unit, which it set up last year in the U.S. state of Texas. Cango said the Georgia site’s conversion was completed in early July, and now has infrastructure that can support up to 3 MW of computing power, with room for future expansion. Necessary hardware has been procured and is being installed in batches to support a phased ramp-up of the site. And perhaps most significantly, Cango said the site has signed its first customer, while the company continues discussions with several others. As a result, it expects to start generating its first revenue from the AI business in the third quarter. Outside Georgia, Cango added it has already begun operating other AI test nodes in Texas and on the U.S. West Coast to serve customers with proximity-based deployment needs in those regions. It said it also continues to evaluate other potential new sites, as well as the possibility of building its own new HPC facilities. New business from the AI operation would be a welcome addition for Cango, whose revenue from its core bitcoin mining operation has been rapidly shrinking as it focuses on more efficient mining. The company generated $50.8 million in revenue during the second quarter, most of that from the bitcoin operation, which was down roughly by half from $102 million in the first quarter. The company attributed the drop to phasing out some of its older, less efficient mining machines, and shifting a portion of its capacity from self-mining to a hosted leasing model. As it shifted its focus to greater efficiency, Cango mined 656 bitcoins during the quarter, averaging about 219 per month, down from its monthly average of 422 bitcoins in the first quarter. It operated 27.58 EH/s of mining capacity as of June 30, also down from 37 EH/s as of March 31. The company held 1,056 bitcoins in its treasury at the end of June, similar to the 1,026 it had at the end of March, but down dramatically from nearly 7,500 in January this year before it started selling its holdings. The company also disclosed that it has started to execute a hedging strategy as a buffer against bitcoin price volatility, though CFO Simon Tang stressed the move was purely for risk management and not for speculative purposes. The focus on greater efficiency led to dramatic improvements in the company’s profitability metrics. Its loss from operations narrowed sharply to $80.6 million in the second quarter from $254.4 million in the first, while its adjusted EBITDA loss fell to $10.7 million from $154.1 million over that period. And on the bottom line, Cango’s net loss of $81.6 million from continuing operations also marked a big improvement from a $261.1 million loss on that basis in the first quarter. "Looking into the second half, our priorities are: managing the mix of self-mining and leased hashrate prudently; executing our first AI deployments and continuing to sign new customers; and building on the operating experience from Georgia as we evaluate further site expansion," said CEO Yu. "Capital discipline and operating efficiency remain our priorities." The Bamboo Works offers a wide-ranging mix of coverage on U.S.- and Hong Kong-listed Chinese companies, including some sponsored content. 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