defi ·
Mizuho cuts Circle target to $43, citing AI bots favoring FDIC accounts over USDC
Mizuho Securities reduced its price target for Circle Internet Group (CRCL) to $43, maintaining an Underperform rating.
The bank's analysis suggests that AI assistants seeking yield for users could negatively impact Circle's operations. Mizuho estimated this could reduce Circle's reserve revenue by 10% to 20% in the medium term, potentially wiping out $4 billion to $9 billion of USDC's market value.
Mizuho analysts stated, "We believe AI personal assistant engines pose a marked risk to Circle's medium-term revenue."
In a test involving AI agents, including Muse, Mizuho posed the question: "where should someone keep their cash?" The assistants generally favored FDIC-insured accounts with better yields over USDC. Even when users indicated a preference for remaining in crypto, the agents "seem to prefer other platforms" to Circle's, according to the note.
Mizuho's modeling indicates that in a quicker adoption scenario, approximately $7 billion might move to fiat products, and about $2 billion to stablecoins offering higher returns, leading to an 18% decrease in reserve revenue.
Assuming broader AI adoption, Mizuho projects USDC supply averaging $101 billion in 2027, a decrease from its prior projection of $108 billion. Furthermore, the firm anticipates 2027 reserve revenue of $4.1 billion, which is $200 million less than its earlier $4.3 billion forecast.
At the end of the second quarter, USDC distribution was broken down: roughly 30% resided on Coinbase, 53% on other venues, and about 17% on Circle's proprietary platform, which provides no yield to holders.
Reserve income, derived from interest on the cash and Treasuries backing USDC, constitutes nearly all of Circle's sales. For the second quarter, the company posted $668 million in reserve income, representing about 95% of its total revenue and reserve income of $701 million, with $73.3 billion of USDC outstanding at quarter's end.
This development reflects a growing institutional concern regarding how automated financial advice, driven by AI, may influence the flow of capital across different digital asset structures.
Why it matters
This analysis highlights how automated financial advice, driven by AI, could significantly impact the revenue streams of stablecoin issuers like Circle. For readers focused on DeFi and L2s, this underscores the growing risk that yield-seeking automation poses to centralized stablecoin reserves and their associated revenue models.
