When Galaxy Digital (GLXY) CEO Mike Novogratz purchased Argos’ Helios information heart in late 2022, on the depths of the post-FTX crypto winter, the corporate thought they had been bailing out a determined bitcoin (BTC) miner on the point of chapter.
This, nevertheless, was earlier than ChatGPT had grow to be mainstream. Novogratz and co. had no concept that this information heart could be a strategic asset because the rising Synthetic Intelligence (AI) business clamours for extra information heart area, due to the explosive development of Giant Language Fashions (LLMs).
As analysts from Rittenhouse Analysis outlined in a brand new be aware, Galaxy’s fortunate discover, which instigated the corporate’s transfer out of BTC mining altogether, would possibly now be crypto’s most profitable pivot, as they make the case that the infrastructure used to mine digital gold is best used to course of AI algorithms, and corporations that shift away from BTC mining in direction of AI infrastructure are set to be the subsequent development shares.
Rittenhouse Analysis is lengthy Galaxy Digital $GLXY $BRPHF
We imagine Galaxy’s flagship information heart Helios will generate $1.7B of EBITDA and $32B of fairness worth within the near-term, w/ vital additional upside.
Our full thesis could be discovered by way of PDF right here: https://t.co/mZ3JwW1CYD pic.twitter.com/4jNHn10oYV
— Rittenhouse Analysis (@RHouseResearch) Could 15, 2025
Analysts from Rittenhouse argue that AI information facilities symbolize 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 as a result of scheduled halvinings. Successfully, the play for a miner is being a long-term bull on BTC’s worth and the power for semiconductor fabs and designers to develop chips which might be 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 by long-term, triple web leases to hyperscaler tenants (a large-scale cloud computing supplier), without having steady funding in mining gear.
“Galaxy stumbled upon Helios by advantage of fine luck,” Rittenhouse wrote of their be aware. Whereas opponents resembling Riot Platforms and Cipher Mining have publicly tried to “rewrite historical past,” retroactively suggesting their enterprise was at all times broader than BTC mining, analysts say, “in actuality, these miners had zero intentions to do something apart from mine BTC till ChatGPT was launched.”
A broader business shift?
Galaxy’s transition displays a broader pattern as BTC miners try and pivot towards AI and cloud computing.
But, analysts underscore Galaxy’s vital benefit, stemming from its superior steadiness sheet ($1.8 billion of web money and investments), profitable execution report, and credibility established by the CoreWeave lease.
Whereas some have raised considerations over CoreWeave’s creditworthiness, inflicting Galaxy’s shares to commerce at a big 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 fastidiously structured by delayed draw time period loans, utilized particularly to finance infrastructure immediately linked to secured buyer agreements, dramatically decreasing default danger.
Rittenhouse additionally notes that Galaxy has gone absolutely 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 heart ambitions, which sends a optimistic sign to potential hyperscaler tenants,” analysts wrote.
As Rittenhouse writes, Cipher Mining’s CEO Tyler Web page just lately 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 would possibly simply transform crypto’s greatest strategic transfer in years – if Rittenhouse’s thesis is appropriate.
