When Galaxy Digital (GLXY) CEO Mike Novogratz purchased Argos’ Helios knowledge 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 getting ready to chapter.
This, nonetheless, was earlier than ChatGPT had develop into mainstream. Novogratz and co. had no concept that this knowledge middle can be a strategic asset because the rising Synthetic Intelligence (AI) business clamours for extra knowledge middle house, because of the explosive progress of Giant Language Fashions (LLMs).
As analysts from Rittenhouse Research outlined in a brand new notice, 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 direction of AI infrastructure are set to be the following progress shares.
Analysts from Rittenhouse argue that AI knowledge 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 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 can be perpetually extra environment friendly, and, for an investor, that is numerous variables.
In distinction, AI knowledge facilities like Galaxy’s Helios facility earn constant, high-margin income via long-term, triple internet leases to hyperscaler tenants (a large-scale cloud computing supplier), with no need steady funding in mining tools.
“Galaxy stumbled upon Helios by virtue of good luck,” Rittenhouse wrote of their notice. Whereas rivals corresponding to Riot Platforms and Cipher Mining have publicly tried to “rewrite history,” retroactively suggesting their enterprise was at all times broader than BTC mining, analysts say, “in reality, these miners had zero intentions to do anything besides mine BTC until 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 important benefit, stemming from its superior stability sheet ($1.8 billion of internet money and investments), profitable execution file, and credibility established via 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 rigorously structured via delayed draw time period loans, utilized particularly to finance infrastructure straight linked to secured buyer agreements, dramatically decreasing default threat.
Rittenhouse additionally notes that Galaxy has gone totally in on AI, and now does not have any publicity to mining.
“Galaxy has completely exited all bitcoin mining activities to focus solely on its AI data center ambitions, which sends a positive signal 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 lost on us that if we’re talking to a counterparty with a $1 trillion market cap… One drawback for bitcoin miners is that major counterparties say, ‘wow, that’s a big obligation for you guys to backstop for such an important investment for us,’” Web page mentioned 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 appropriate.
