Given all the hype and buzz around artificial intelligence (AI) these days, it's perhaps no surprise that a growing number of beaten-down crypto tokens are attempting to reinvent themselves for the AI future. Take Polkadot (CRYPTO: DOT), for example. Over the past several months, the formerly high-flying crypto has been making a lot of noise about becoming part of the AI revolution.

So, is all this a lot of sound and fury signifying nothing? Or is there real reason to believe that Polkadot can reinvent itself for AI and see a dramatic boost in valuation? Let's take a closer look.

Polkadot, in search of a new pattern

The first thing to keep in mind is just how poorly Polkadot has performed recently. If you look at a chart for Polkadot, you'll essentially see a flat line extending from mid-2022 to the current period. In the past two years, Polkadot has done literally nothing for investors.

At its current price of $7, Polkadot is now down a whopping 87% from an all-time high of $55 in November 2021. Year to date, Polkadot is down 17%, so it hasn't even benefited from the surge in interest in crypto, driven by Bitcoin (CRYPTO: BTC) and the new spot Bitcoin exchange-traded funds (ETFs). By way of comparison, other top altcoins are up 30% to 50% for the year.

Polkadot's AI revolution

So, obviously, Polkadot needed to do something to change investor perceptions. And that "something" turned out to be artificial intelligence. In April, Polkadot unveiled a number of details on how it plans to "unleash the power of AI" using blockchain technology. This includes a new plan to attract AI-focused blockchain partners for the Polkadot ecosystem and a new overhaul of its core blockchain architecture to make it more accessible, scalable, and interoperable for AI projects.

This AI narrative is starting to gain traction in the crypto world, and some high-profile crypto analysts have come out in favor of Polkadot. This is partly due to the potential fit between AI technology and Polkadot's blockchain technology. It also, in part, has to do with the trust the crypto community has in Polkadot founder Gavin Wood, who is also one of the co-founders of Ethereum (CRYPTO: ETH).

Last year, Wood outlined a new vision to transform Polkadot into a "global supercomputer" in which every blockchain connected to the main Polkadot blockchain would function like a different computing core. To get the Polkadot "global supercomputer" to do more and more, you only needed to add more blockchains.

At a crypto conference in Dubai this year, Wood followed up that vision with something called the Join-Accumulate Machine (JAM), a new computing design that seeks to make Polkadot more like Ethereum.

While reading a 55-page paper filled with complex mathematical equations on how JAM works is possible, it's easier just to focus on the big picture. JAM promises to be a sweeping new vision of how the Polkadot blockchain architecture works and how Polkadot can reshape itself for the computational needs of AI.

So, is Polkadot worth $27?

While all this might sound incredibly wonky, it serves to illustrate a point: Polkadot's AI ambitions are not just a lot of marketing hype. Some incredibly smart people are working on this project, and some real steps are being taken to transform Polkadot for AI.

Thus far, Polkadot is having some initial success in attracting new AI blockchain partners. As Polkadot attracts more and more of these AI-focused partners, its valuation should increase. Polkadot has even created its own AI bot, known as Polkabot, that briefly created some online buzz.

While the concept of an AI transformation is certainly intriguing, I'm hesitant about some of the aggressive valuations I've seen for Polkadot recently. For example, there is now a $27 price target for Polkadot. That's a nearly 300% increase from today's price of $7! Given just how poorly Polkadot has performed of late, that seems a bit fantastical to me. Polkadot's current market cap is $10 billion, so that higher valuation would imply the ability to generate $30 billion in value from new AI projects.

Keep in mind, too, that plenty of other crypto tokens are also seeking to reinvent themselves for the AI revolution, so investors have options. While Polkadot has certainly earned a spot on my crypto watchlist, I'm still in wait-and-see mode to see whether it can really deliver on its AI ambitions.

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Dominic Basulto has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.

Is Rapid Growth in AI the Key to Polkadot Soaring in Value by 300%? was originally published by The Motley Fool