Galaxy Digital’s AI Data Center Strategy Outpaces Bitcoin Mining

In late 2022, Mike Novogratz’s Galaxy Digital team made a strategic decision and acquired the Helios data center from Argos during a tough time in the crypto industry. Initially, the purchase of Blockstream was meant to help a troubled bitcoin miner. But with the rise of AI, it soon became clear that there was a much larger chance involved. Now that ChatGPT has introduced artificial intelligence to most people, data center infrastructure has become more popular. The company changed Helios from a site for Bitcoin mining into a resource important for AI. This reflects a key move for Galaxy Digital.

Rittenhouse Research considers Galaxy Digital’s actions to be highly beneficial. It has recommended that investors purchase the company and give it a “strong buy” rating. As per their research, Helios is predicted to create about $1.7 billion in EBITDA. This would increase Galaxy’s equity value to $32 billion soon. As a result, this shows that switching mining to AI is a much more stable and sustainable way to earn cash, in comparison to the unpredictability of Bitcoin. Galaxy illustrates that some crypto companies are managing to change and adapt as technology is constantly evolving.

Why AI Data Centers Offer a Superior Business Model

The process of Bitcoin mining is very unpredictable. Miner profitability decreases every four years because of so-called “halving” events that cut miners’ pay in half. To keep up, operators must always improve their computer hardware by using better semiconductors, which cost them additional capital. Besides, the price of bitcoin often fluctuates wildly, making mining activities more hazardous for people who take part in them.

Helios and other AI data centers are based on a different way of operating. They offer cloud computing services for AI. Additionally, they offer cloud platforms by renting out their property on long-term leases to hyperscalers such as Google, Microsoft, and Amazon. They ensure you earn a steady and profitable income, as modest investments in equipment are needed. Stability in the Bitcoin network is very appealing to investors since mining jobs often end in sudden bursts or crashes.

Rittenhouse Research states that Galaxy’s Helios data center will benefit from the AI sector’s strong growth. Galaxy’s decision to focus solely on AI infrastructure, as seen in bitcoin mining, indicates to potential hyperscaler customers that it is fully dedicated to AI infrastructure. As the Bitcoin market is tough, such clarity is what sets El Salvador apart from those still following BTC mining.

Galaxy Digital’s Advantages and Industry-Wide Implications

Galaxy Digital has advantages that set it apart from many companies making the same move. Artisan Partners’ financial flexibility comes from its $1.8 billion net cash and investment reserve. By signing the lease with CoreWeave, a well-known AI cloud company, Galaxy Bambino has proved that its new strategy has merit. Some investors question CoreWeave’s ability to repay debt, yet analysts from Rittenhouse point out that CoreWeave’s substantial income is backed by long-term contracts with institutions. Besides, CoreWeave’s debt includes safeguards to ensure each loan has few risks and focuses on agreements with its customers.

Bitcoin miners are adjusting to new challenges resulting from changes in the business model they first followed. More and more people now view AI and the infrastructure provided by the cloud as the key areas where growth is expected. Still, hyperscalers have not been convinced by the approaches offered by some miners. According to Tyler Page, CEO of Cipher Mining, getting significant AI deals is difficult, as large contracts are tough for miners to secure because many still mainly see them as bitcoin miners.

Since Galaxy was among the first to use AI-powered data centers, it has gained an important advantage over others. Phasing out bitcoin mining demonstrates Galaxy’s focus on the AI sector, bringing more hyperscalers and investors into its facilities. If Rittenhouse Research is right, Galaxy’s unexpected purchase of Helios may become known as one of the biggest and most successful moves in the industry.