When the CEO of Galaxy Digital (GLXY), Mike Novograph, bought the Helios de Argos Data Center at the end of 2022, at the depths of FTX crypto winter, the company thought they were rescuing a desperate mining of Bitcoin (BTC) on the edge of bankruptcy.
This, however, was before Chatgpt had become the mainstream. Novograph and co. I had no idea that this data center would be a strategic asset such as the growing clamor of the artificial intelligence industry (AI) for more space in the data center, thanks to the explosive growth of large language models (LLM).
As Rittenhouse research analysts are described in a new note, Galaxy’s Lucky Find, who instigated the company’s moving out of BTC mining completely, could now be Crypto’s most lucrative twin, as the fact that the infrastructure is used for digital gold AI infrastructure is best used to process AI algorithms.
Rittenhouse analysts argue that AI data centers represent a significantly more lucrative business model than BTC mining because they generate long -term stable cash flows with minimal continuous capital expenses, contrasting strongly with the volatility and capital intensity of Bitcoin mining.
BTC mining income decreases inherently by approximately 50% every four years due to scheduled halvings. Indeed, the game for a miner is a long -term bull in the price of BTC and the capacity of manufacturers and semiconductor designers to develop chips that are perpetually more efficient and, for an investor, there are many variables.
On the contrary, AI data centers such as the installation of Helios de Galaxy obtain consistent and high margin income through long -term triple leases to hyperscaleros tenants (a large -scale cloud computing provider), without the need for continuous investments in mining equipment.
“Galaxy stumbled upon Helios by virtue of good luck,” Rittenhouse wrote in his note. While competitors such as riot platforms and encryption mining have publicly tried to “rewrite history”, retroactively suggesting that their business was always broader than BTC mining, analysts say: “Actually, these miners had zero intentions of doing anything in addition to mine BTC until Chatgpt was launched.”
A broader industry change?
The Galaxy transition reflects a broader trend as BTC miners try to turn to AI and cloud computing.
However, analysts underline the important advantage of Galaxy, derived from its upper balance ($ 1.8 billion of net cash and investments), a successful execution record and credibility established through the lease of Coreweave.
While some have raised concerns about the solvency of Coreweave, which makes Galaxy actions work with a significant discount, Rittenhouse analysts say that these fears are significantly exaggerated, highlighting the stability of exceptional revenue of Coreweave of long -term contracts that represent 96% of their income and their strong institutional support.
Analysts emphasize that Coreweave’s debt is carefully structured through delayed extraction loans, specifically used to finance infrastructure directly linked to safe customer agreements, drastically reducing the risk of breach.
Rittenhouse also points out that Galaxy has completely entered AI, and now has no exposure to mining.
“Galaxy has completely left all Bitcoin mining activities to focus only on their AI data center ambitions, which sends a positive signal to possible hyperscaleros tenants,” analysts wrote.
As Rittenhouse writes, Cipher Mining CEO, Tyler Page, recently acknowledged that the uphill battle miners approaching the main customers of AI.
“We are not missing that if we are talking with a counterpart with a market capitalization of $ 1 billion … an inconvenience for Bitcoin miners is that the main counterparts say: ‘Wow, that is a great obligation for you of such an important investment for such an important investment for us'”, said Page in the gain call Q1 2025 of the company.
Galaxy doesn’t have that problem. With this Helios agreement in its place and the Novogratz company totally out of mining, Galaxy’s accidental pivot could be the best Crypto strategic movement in years, if Rittenhouse’s thesis is correct.
