Nano Labs Ltd (NA)

Executive Summary / Key Takeaways

• Strategic Pivot to Crypto Treasury: Nano Labs has executed a radical transformation in 2025, shifting from a faltering chip designer to a BNB-focused cryptocurrency reserve company, with over 128,000 BNB tokens worth more than $108 million representing the bulk of its enterprise value.

• Core Business in Freefall: The legacy chip and mining machine segment is collapsing, with H1 2025 revenue plunging 66% year-over-year to just RMB 8.28 million ($1.16 million) and gross losses widening to RMB 10.71 million, demonstrating that the Cuckoo 3.0 chip has failed to stem the decline.

• Financial Fragility Meets Asset Growth: While the company maintains a cash position of RMB 363 million ($50.8 million) and digital assets worth approximately $160 million, its operating burn of RMB 38 million in H1 2025 and negative 261% profit margin highlight a business that cannot sustain itself from operations.

• Execution Risk at Scale: Management's plan to acquire up to $1 billion in BNB through convertible notes and private placements represents a massive leverage bet on a single crypto asset, exposing investors to concentration risk, regulatory uncertainty, and potential margin calls if BNB prices decline.

• Critical Monitoring Points: Investors must track BNB price movements, the pace of crypto reserve expansion, any further deterioration in chip sales, and regulatory developments in Hong Kong's stablecoin regime, as these factors will determine whether this transformation creates or destroys shareholder value.

Setting the Scene: From Silicon to Digital Assets

Nano Labs Ltd, founded in 2019 and headquartered in Hangzhou, began as a fabless integrated circuit designer targeting the metaverse computing and cryptocurrency mining markets. The company initially gained traction by developing specialized chips for high-throughput computing, reaching peak revenue of RMB 983.17 million in 2022. This early success positioned Nano Labs as a minor player in China's competitive semiconductor landscape, where it competed against far larger domestic rivals like Cambricon Technologies (688041.SS) and Canaan Inc. (CAN).

The company's place in the value chain was straightforward: design application-specific integrated circuits (ASICs) and complete mining machines, outsource manufacturing to foundries like SMIC (SMICY), and sell to cryptocurrency miners and metaverse developers. However, the industry structure proved brutally cyclical. As cryptocurrency markets entered a downturn and Chinese regulatory pressures intensified, demand for mining hardware evaporated. By H1 2025, the core chip business had deteriorated to a shadow of its former self, generating just $1.16 million in revenue while posting gross losses.

This collapse forced a existential strategic reassessment. Rather than attempting to compete in an increasingly commoditized and capital-intensive chip market against better-funded rivals, management made a decisive pivot. In 2025, Nano Labs transformed itself into a cryptocurrency treasury company, with BNB as its core strategic reserve. This shift represents a fundamental change in business model—from creating technology to holding digital assets. The company now describes itself as aiming to become a "world-leading publicly listed cryptocurrency reserve enterprise," a stark departure from its semiconductor roots.

Technology, Products, and Strategic Differentiation

The Cuckoo series chips, including the much-touted Cuckoo 3.0 that began mass production in May 2024, were supposed to be Nano Labs' technological salvation. Management claimed the chip offered "the highest computing power and the lowest power efficiency among our current products," with features like high-bandwidth multichannel 3D DRAM and specialized low-voltage circuits designed for AI applications. The company launched upgraded machines equipped with Cuckoo 3.0 in December 2024, expecting significant sales growth.

The complete failure of this product to move the needle reveals the depth of Nano Labs' competitive disadvantage. Despite technical improvements, H1 2025 chip revenue collapsed 66% year-over-year, indicating that customers preferred solutions from Cambricon, Canaan, or even general-purpose GPUs. The Cuckoo 3.0's "leading position globally" existed only in management's commentary, not in market adoption. This matters for investors because it shows that technological differentiation alone cannot overcome weak distribution, brand recognition, and scale disadvantages in the semiconductor industry.

The metaverse photography studio service and 3D printing products represent another attempted pivot. Revenue from 3D printing grew from nil in 2022 to RMB 787,000 in H2 2023, then to RMB 459,200 in H1 2024. While this represents impressive percentage growth, the absolute numbers are immaterial and cannot offset the chip business decline, making it a distraction rather than a viable alternative revenue stream.

The real strategic differentiation now lies in the crypto treasury strategy. By accumulating over 128,000 BNB tokens worth $108 million, Nano Labs has created a direct correlation between its stock price and BNB's performance. This is a double-edged sword: it provides potential upside if BNB appreciates, but concentrates risk in a single asset. The company's partnership with Orbiter Finance to launch NBNB.io, a compliant stablecoin solution, and its NBNB Program for real-world asset tokenization, show management attempting to build an ecosystem around its crypto holdings. However, these initiatives remain in early stages with no meaningful revenue contribution.

Financial Performance & Segment Dynamics

Nano Labs' financial results tell a story of a company in transition—painfully. H1 2025 revenue of RMB 8.28 million ($1.16 million) represents a 66% decline from the prior year, driven by the continued collapse of iPollo V series sales. The gross loss of RMB 10.71 million ($1.5 million) marks a dramatic reversal from the RMB 30,000 gross profit in H1 2024. This deterioration occurred despite the Cuckoo 3.0 launch, proving that new products cannot revive a structurally broken business.

This demonstrates that Nano Labs' operating business has negative value—it destroys capital with each sale. The cost of revenue at RMB 18.99 million exceeded sales revenue by 129%, meaning the company loses money on every unit sold. This is unsustainable and explains why management has effectively abandoned the chip business to focus on crypto.

Operating expenses decreased 53.5% to RMB 27.33 million, with R&D spending slashed 89.1% to just RMB 3.2 million. While this cost-cutting reduced the operating loss to RMB 38.03 million from RMB 58.69 million, it came at the expense of future product development. A technology company that cuts R&D by nearly 90% is not investing in its future—it is harvesting its past. This matters because it suggests the chip business will not recover; management is simply managing its decline.

The balance sheet reveals the company's true value proposition. As of June 30, 2025, Nano Labs held RMB 363 million ($50.8 million) in cash and cash equivalents, plus approximately $160 million in digital assets. This $210 million in liquid assets against a market capitalization of $69.58 million suggests the market values the operating business at negative $140 million. The crypto assets are not just a strategic initiative—they are the entire investment case.

Outlook, Management Guidance, and Execution Risk

Management's commentary has shifted dramatically from chips to crypto. In the Q2 2025 earnings call, CEO Jianping Kong stated, "The year 2025 marks a major transformation for the company... we focus our resources and efforts on expanding our work with strategic reserves." This is corporate-speak for abandoning the legacy business. The plan to acquire up to $1 billion in BNB through convertible notes and private placements represents a staggering increase in both scale and risk.

Why does this matter? Because it signals management's recognition that the chip business is terminal, but also exposes investors to massive execution risk. A $1 billion crypto acquisition program for a company with $50 million in annual revenue and negative operating cash flow requires continuous external financing. If crypto markets turn or financing dries up, the strategy collapses. The early repayment of convertible bonds in November 2025, described as "mitigating risks associated with Bitcoin management and broader market volatility," actually reveals concern about debt serviceability.

Management's guidance is simultaneously ambitious and vague. They project that Cuckoo 3.0 machines "are being steadily shipped" and will impact performance, yet H1 2025 results show no such impact. They claim the photography studio service will "contribute to overall revenue," but the segment remains negligible. The crypto strategy is the only area receiving concrete investment, with specific targets for BNB accumulation and ecosystem development.

The critical execution factors are: (1) maintaining BNB's price appreciation to justify the treasury strategy, (2) securing continuous financing for crypto acquisitions, and (3) preventing further cash burn from the chip business. Failure on any front could force distressed asset sales or dilutive equity raises.

Risks and Asymmetries

The primary risk is concentration. Holding over 128,000 BNB tokens means Nano Labs' fate is tied to a single cryptocurrency's performance. If BNB declines 50%, the company's primary asset loses $54 million in value, potentially triggering margin calls on any debt secured against these holdings. This matters because it transforms Nano Labs from a technology investment into a leveraged crypto bet, with all the associated volatility.

Regulatory risk looms large. The Hong Kong Stablecoins Bill, effective August 2025, creates a licensing regime that Nano Labs plans to pursue. However, regulatory approval is not guaranteed, and operating a stablecoin business requires compliance infrastructure the company lacks. The NBNB.io partnership with Orbiter Finance is unproven, with product launch not expected until Q4 2025. Any regulatory setback could derail this revenue stream before it begins.

The chip business poses hidden liabilities. Inventory write-downs and value-added tax recoverables contributed to the gross loss, suggesting potential for further balance sheet impairments. If the company cannot wind down this segment cleanly, additional cash burn or restructuring costs could emerge.

Financing risk is acute. The plan to raise $1 billion for BNB acquisitions depends on investor appetite for a company with negative operating margins and a declining core business. If crypto markets correct or interest rates rise, financing could become prohibitively expensive or unavailable, leaving the strategy half-executed and the company over-leveraged.

On the upside, if BNB appreciates significantly and Nano Labs successfully launches its stablecoin and RWA infrastructure, the company could become a major player in Hong Kong's digital asset ecosystem. The uplisting to the Nasdaq Global Market in September 2025 improves liquidity and institutional access, potentially lowering financing costs. However, these upside scenarios require flawless execution in multiple complex domains simultaneously.

Valuation Context

At $3.01 per share and a $69.58 million market capitalization, Nano Labs trades at a significant discount to its liquid assets. The company holds approximately $210 million in combined cash and digital assets, implying the market assigns negative value to the operating business. This matters because it creates a potential margin of safety—if the crypto assets hold their value, the stock appears cheap on an asset basis.

However, traditional valuation metrics are challenging for an unprofitable company. The price-to-sales ratio of 12.1 times (based on $5.75 million TTM revenue) is meaningless given the 66% revenue decline and negative margins. The enterprise value of $48.31 million is roughly 8.4 times TTM revenue, but this ignores the fact that revenue is shrinking and unprofitable.

For unprofitable companies, the key metrics are cash runway and asset value. With $50.8 million in cash and a quarterly operating burn of $5.3 million, Nano Labs has approximately 9-10 quarters of runway before exhausting cash reserves. However, the $160 million in digital assets provides a substantial buffer—if these can be liquidated without significant market impact.

Comparing to peers is instructive. Cambricon trades at 1,030 times sales with 33% profit margins and explosive growth, reflecting its dominant position. Canaan trades at 1.45 times sales with negative margins, showing the market's skepticism of crypto-exposed chip businesses. QuickLogic (QUIK) trades at 6.77 times sales with similar losses to Nano Labs. Nano Labs' valuation appears most similar to distressed peers, but its crypto holdings create a unique asset-based valuation case.

The critical valuation question is: what is the appropriate discount for a company holding volatile crypto assets while operating a dying business? The market's 67% discount to asset value suggests significant skepticism about both the crypto strategy's execution and potential hidden liabilities in the chip segment.

Conclusion

Nano Labs represents a high-stakes transformation play where the investment thesis hinges entirely on cryptocurrency treasury management rather than technological innovation. The company's core chip business has collapsed beyond repair, with H1 2025 results showing 66% revenue decline and gross losses, rendering it a net negative value driver. This matters because it eliminates any margin for error in the crypto strategy—there is no fallback business to support the company if BNB prices fall or financing dries up.

The BNB treasury strategy, while potentially lucrative, concentrates risk in a single asset and requires continuous external financing to reach its $1 billion acquisition target. Management's execution to date shows discipline in accumulating crypto assets but limited progress in building sustainable revenue streams from stablecoin or RWA infrastructure. The early bond repayment and Nasdaq uplisting improve the company's financial flexibility and credibility, yet cannot offset the fundamental challenge of building a profitable business from scratch in a highly competitive and regulated space.

For investors, Nano Labs offers an asymmetric risk-reward profile. The asset-based valuation suggests downside protection if crypto holdings maintain value, but the operating business's cash burn and execution risks create multiple paths to permanent capital loss. The stock will likely trade as a leveraged proxy for BNB price movements until the company demonstrates it can generate recurring revenue from its Web3 initiatives. Success requires flawless execution in crypto markets, regulatory navigation, and capital raising—three domains where the company has limited proven expertise. The transformation may be major, but the odds of success remain decidedly uncertain.