The Bull Case for Galaxy Digital (GLXY) is AI Knowledge Facilities Not BTC Mining: Analysis Agency

When Galaxy Digital (GLXY) CEO Mike Novogratz purchased Argos’ Helios information middle in late 2022, on the depths of the post-FTX crypto winter, the corporate thought they have been bailing out a determined bitcoin (BTC) miner on the point of chapter.

This, nevertheless, was earlier than ChatGPT had develop into mainstream. Novogratz and co. had no concept that this information middle can be a strategic asset because the rising Synthetic Intelligence (AI) trade clamours for extra information middle area, because of the explosive progress of Giant Language Fashions (LLMs).

As analysts from Rittenhouse Analysis outlined in a brand new observe, Galaxy’s fortunate discover, which instigated the corporate’s transfer out of BTC mining altogether, may now be crypto’s most profitable pivot, as they make the case that the infrastructure used to mine digital gold is healthier used to course of AI algorithms, and corporations that shift away from BTC mining in the direction of AI infrastructure are set to be the subsequent progress shares.

Analysts from Rittenhouse argue that AI information facilities characterize a considerably extra profitable enterprise mannequin than BTC mining as a result of they generate secure, long-term money flows with minimal ongoing capital expenditures, contrasting sharply with the volatility and capital depth of bitcoin mining.

BTC mining revenues inherently decline by roughly 50% each 4 years because of the scheduled halvinings. Successfully, the play for a miner is being a long-term bull on BTC’s value and the flexibility for semiconductor fabs and designers to develop chips which are perpetually extra environment friendly, and, for an investor, that is lots of variables.

In distinction, AI information facilities like Galaxy’s Helios facility earn constant, high-margin income via long-term, triple web leases to hyperscaler tenants (a large-scale cloud computing supplier), with no need steady funding in mining gear.

“Galaxy stumbled upon Helios by advantage of fine luck,” Rittenhouse wrote of their observe. Whereas rivals akin to Riot Platforms and Cipher Mining have publicly tried to “rewrite historical past,” retroactively suggesting their enterprise was all the time broader than BTC mining, analysts say, “in actuality, these miners had zero intentions to do something in addition to mine BTC till ChatGPT was launched.”

A broader trade shift?

Galaxy’s transition displays a broader pattern as BTC miners try to pivot towards AI and cloud computing.

But, analysts underscore Galaxy’s important benefit, stemming from its superior stability sheet ($1.8 billion of web money and investments), profitable execution report, and credibility established via the CoreWeave lease.

Whereas some have raised issues over CoreWeave’s creditworthiness, inflicting Galaxy’s shares to commerce at a major low cost, Rittenhouse analysts say these fears are considerably overblown, highlighting CoreWeave’s distinctive income stability from long-term contracts accounting for 96% of its revenues and its robust institutional backing.

The analysts emphasize that CoreWeave’s debt is rigorously structured via delayed draw time period loans, utilized particularly to finance infrastructure instantly linked to secured buyer agreements, dramatically decreasing default danger.

Rittenhouse additionally notes that Galaxy has gone totally in on AI, and now does not have any publicity to mining.

“Galaxy has fully exited all bitcoin mining actions to focus solely on its AI information middle ambitions, which sends a optimistic sign to potential hyperscaler tenants,” analysts wrote.

As Rittenhouse writes, Cipher Mining’s CEO Tyler Web page not too long ago acknowledged the uphill battle miners face when approaching main AI clients.

“It’s not misplaced on us that if we’re speaking to a counterparty with a $1 trillion market cap… One disadvantage for bitcoin miners is that main counterparties say, ‘wow, that’s an enormous obligation for you guys to backstop for such an vital funding for us,’” Web page stated on the corporate’s Q1 2025 earnings name.

Galaxy does not have that drawback. With this Helios deal in place and Novogratz’s firm completely out of mining, Galaxy’s unintentional pivot may simply become crypto’s finest strategic transfer in years – if Rittenhouse’s thesis is right.