Duncan from Flood Capital and Matt from Rittenhouse Research join Empire to break down why Galaxy Digital (GLXY) is a deeply misunderstood and undervalued company. They argue Galaxy is a rare two-for-one bet, uniquely positioned at the intersection of institutional crypto adoption and the AI infrastructure boom.
The Goldman Sachs of Crypto
- "I call them the Goldman Sachs of crypto or the Berkshire Hathaway of crypto because they just touch literally every element of crypto. Galaxy is involved at some point."
Galaxy’s Digital Assets business is a comprehensive institutional platform, often compared to an investment bank for the crypto-native world. It avoids the retail market, focusing instead on trading (with nearly 1,400 counterparties), asset management (over $7B in AUM), investment banking (advising on deals like Bitstamp’s sale to Robinhood), and infrastructure like staking and custody. This is all supported by a formidable ~$3.3B balance sheet, giving it the capital to out-muscle capital-starved competitors and avoid the massive shareholder dilution that plagues crypto miners.
The Accidental AI Power Broker
- "Energy is the biggest bottleneck right now. Even if Meta wants to spend 100 to 150 billion on capex for AI infrastructure, they can't… Even if you have the money, you can't spend it."
Galaxy stumbled into a goldmine. Its Helios facility in West Texas, acquired from a distressed Bitcoin miner, is now a crown jewel in the AI arms race. The company has an 800-megawatt (MW) power contract, a scarce resource that hyperscalers desperately need.
- The CoreWeave Deal: Galaxy has already leased 600 MW to AI cloud provider CoreWeave in a 15-year deal projected to generate ~$900 million in annual revenue at a staggering 90% EBITDA margin.
- Massive Expansion: This is just the start. Galaxy has another 1.7 gigawatts (GW) of power under review with Texas regulators, with the first 800 MW tranche expected to be approved by year-end. If successful, Helios could become one of the largest data center sites in the world, on par with projects from Meta and Microsoft.
The Sum-of-the-Parts Bull Case
- "It's really a classic case of the market not fully understanding something. But as they sort of generate revenue at Helios beginning next year, I think the story will become a lot cleaner and it should sort of rerate accordingly."
The market struggles to value Galaxy’s complex, conglomerate-like structure, creating a potential opportunity. A sum-of-the-parts analysis suggests the company is significantly undervalued. The balance sheet offers a floor, the crypto business provides exposure to institutional adoption, and the data center business presents massive, non-correlated upside. While risks like customer concentration with CoreWeave exist, the lease provides immense credibility for attracting other hyperscalers like Oracle or Google to its future capacity.
Key Takeaways
- Galaxy offers investors a unique, leveraged play on two of the biggest secular trends today: institutional crypto and AI. The stock is a complex story, but one that could radically simplify—and re-rate—as its data center business comes online.
- A Pick-and-Shovel Play on Two Megatrends. GLXY provides exposure to both the institutionalization of crypto and the insatiable demand for AI data center capacity, all in a single stock.
- The Data Center is the Crown Jewel. The CoreWeave contract provides a solid revenue baseline, but the real upside is the 1.7 GW expansion pipeline, which could transform Galaxy into a top-tier AI infrastructure player.
- An Undervalued and Misunderstood Story. The stock's complexity creates a valuation disconnect. As the Helios data center begins generating cash flow in 2026, the narrative will become clearer, potentially forcing a significant market re-rating.
For further insights and detailed discussions, watch the full podcast: Link
This episode reveals how Galaxy Digital (GLXY) is uniquely positioned at the intersection of crypto finance and the AI-driven demand for data center capacity, making a powerful case for its potential as a deeply undervalued asset.
Galaxy's Misunderstood Business Model
- Three Core Components: Duncan breaks down Galaxy's $10 billion market cap into three primary buckets: its balance sheet, its crypto-native business lines, and its emerging data center business. This structure provides the framework for valuing the company.
- Initial Valuation: As of the recording, with a ~$10 billion market cap and a liquid balance sheet of roughly $3.3-$3.5 billion (crypto, stables, cash), the market is effectively valuing the entire crypto operating business and the massive data center operation at just $6.5-$7.5 billion.
The Strategic Importance of the Balance Sheet
- Liquid Assets: As of March 31, Galaxy held approximately $1.8 billion in liquid crypto (BTC, ETH, SOL), $1 billion in stablecoins, and $500 million in cash. Matt adds that this doesn't include several hundred million in illiquid venture investments, like stakes in Fireblocks and Bullish, which could hold significant future value.
- A Key Differentiator from Bitcoin Miners: Many Bitcoin miners are attempting to pivot to AI data centers but are hampered by weak balance sheets and a history of shareholder dilution. Matt notes that miners like Core Scientific and TerraWulf have less than a billion in cash and have historically burned capital.
- Enabling the AI Pivot: Galaxy's strong capital position is crucial for funding the capital-intensive data center build-out. Matt explains, "You need to really have a ton of confidence in the developer of the data center that they're going to have the financial resources to be able to complete these massive construction jobs on time." Galaxy's balance sheet provides this credibility to hyperscaler tenants.
The "Goldman Sachs of Crypto"
- Franchise Trading: Galaxy operates a massive trading, lending, and derivatives business with nearly 1,400 institutional counterparties and a loan book approaching $900 million, making it one of the largest CeFi lenders. The recent execution of an $8 billion BTC trade for a single whale highlights its status as the go-to desk for large-scale institutional trades.
- Asset Management & Staking: The firm manages over $7 billion in assets across ETFs and various funds. It is a major validator on networks like Solana and Ethereum and is deeply involved in new treasury products, such as managing half the ETH for the ESBT deal.
- Infrastructure and Tokenization: A key, under-the-radar asset is GK8, an institutional-grade custody and tokenization platform acquired by Galaxy. Matt identifies this as a particularly exciting area, especially with Galaxy's 33% ownership in AllUnity, the issuer of one of the first fully regulated Euro stablecoins. This positions Galaxy to be a central player in the future tokenization of real-world assets like European stocks.
The AI Data Center Gold Rush
- The Compute Bottleneck: Hyperscalers like Meta, Microsoft, and Google are spending hundreds of billions on capex to build out AI infrastructure. However, the primary bottleneck is not just chips, but power. A former Meta employee is quoted: "Energy is the biggest bottleneck right now... Even if you have the money, you can't spend it."
- The Value of a Power Contract: The scarcity of grid-ready power makes existing power contracts incredibly valuable. AI data centers require immense, concentrated power, and the approval process for new sites can take years. This is where Bitcoin miners with pre-existing power agreements have an advantage, though most lack the capital to execute a pivot.
Helios: Galaxy's Crown Jewel
- The Argo Acquisition: In late 2022, Galaxy acquired the Helios facility in West Texas from struggling Bitcoin miner Argo Blockchain, to whom it had provided a loan. What was initially a Bitcoin mining site became a strategic asset of immense value with the explosion in AI.
- The CoreWeave Partnership: Galaxy signed a landmark deal to lease its Helios site to CoreWeave, a rapidly growing AI cloud provider that was formerly an Ethereum miner. This relationship was born from Galaxy's deep roots in the crypto ecosystem.
- Massive Scale and Economics:
- Helios has 800 megawatts (MW) of approved power, with 600 MW already leased to CoreWeave. For context, Meta's planned 1-gigawatt data center is being touted as the world's largest.
- The 600 MW lease is projected to generate an average of $900 million in annual revenue for 15 years, with EBITDA margins around 90% because CoreWeave covers most operating expenses.
- Duncan's model shows this could be worth $46 per share by 2028, or a present value of $30 per share today—more than the stock's current price.
Future Growth and Expansion
- Expansion Potential: Galaxy has an additional 1.7 gigawatts (GW) of power under study with ERCOT (the Texas grid operator), applied for back in 2021. Management expects an 800 MW tranche to be approved by the end of the year.
- Beyond Helios: The management team is actively evaluating a pipeline of over 40 other Bitcoin mining sites for acquisition or partnership. Novogratz himself stated, "I would be very surprised in the not too distant future if we're only talking about Helios as the one site we're developing."
Addressing the Bear Case
- Customer Concentration: The reliance on a single tenant, CoreWeave, is a valid risk. However, Matt clarifies that CoreWeave's debt is largely tied to specific customer contracts (like with OpenAI), making its business model more robust than it appears.
- Execution Risk: Building out a data center of this scale is complex. However, Galaxy has hired a team of experts and is working with a top-tier contractor. The existing lease with CoreWeave provides a massive stamp of credibility for attracting future tenants like Oracle or Google.
- Why the Market is Missing the Story: The stock is undervalued because it's a complex, conglomerate-like story that doesn't fit neatly into a single box. It was also only recently uplisted to the NASDAQ, so many institutional investors are just beginning their due diligence. A future spin-off of the data center business is likely, which would unlock significant value.
Conclusion: A Multi-Faceted Play on Crypto and AI
Galaxy Digital represents a rare convergence of two of the biggest secular trends: crypto adoption and the AI revolution. The synergy between its crypto business and its data center opportunity creates a powerful, self-funding growth engine. For investors, the current valuation appears to neglect the immense, de-risked potential of the Helios data center.
