Why is Galaxy Digital (GLXY) considered an undervalued investment opportunity?

Author: TTx0x, encryption KOL; Translator: Golden Finance xiaozou

1. Introduction

Galaxy Digital (NASDAQ: GLXY) can be considered an undervalued opportunity at the intersection of two of the strongest long-term trends - encryption technology and artificial intelligence. The market is mistakenly assessing Galaxy as a volatile encryption company, while overlooking the immense value of its "crown jewel" asset, Helios Data Center. Helios is a world-class AI infrastructure platform expected to generate stable, high-margin, long-term cash flow.

The core of this investment view is that the market will ultimately re-rate GLXY due to its successful transformation from a digital asset service company to a leading AI infrastructure operator. The company's recent signing of a 15-year master lease with AI supercomputing service provider CoreWeave, covering the currently approved 800 megawatts of total power for Helios, validates its business model and suggests an annual recurring revenue stream of approximately $720 million and a 90% EBITDA profit margin.

Galaxy has a clear advantage over competitors attempting to transition from "Bitcoin miners to AI". This is primarily reflected in its fortress-like balance sheet with over $1.8 billion in net cash and investments, a management team with deep professional experience, and a clear path to expand Helios to a potential 3.5 GW campus.

2. Investment View: Unlocking Top AI Infrastructure Targets

(1) Core Error Pricing

Galaxy consists of two distinctly different business segments: traditional digital asset financial services and emerging AI data center infrastructure. However, the market currently evaluates GLXY through a single perspective—namely, as an encryption company. The price movement of GLXY is still highly correlated with Bitcoin, indicating that investors have not yet priced in the tailwinds provided by its AI data center business.

(2) Unexpected Acquisition Opportunities

At the end of 2022, Galaxy acquired the Helios data center campus from Argo Blockchain for a mere $65 million through a distressed sale. At that time, Argo was facing bankruptcy and needed to liquidate assets. Galaxy acquired this world-class infrastructure asset at a price far below the current reset cost. This transaction occurred before the explosion in AI-driven electricity and data center demand triggered by ChatGPT, and this move alone repositioned Galaxy's growth trajectory for the next decade.

(3) Helios's Strategic Assets

Helios is far from an ordinary data center; it is a tier-one infrastructure asset specifically designed to meet the demands of the AI revolution.

Power Advantage:

The biggest constraint facing the AI data center industry is power supply. Power contracts are the "restrictive factors" that supercomputing service providers are competing to deploy GPU capabilities. Helios has secured an 800 MW approved power contract with the Texas power operator ERCOT, allowing tenants to bypass the typical new grid connection waiting period of over 36 months. In addition, the park has a clear and defined expansion path, with another 1.7 GW of capacity currently in load study, allowing the potential capacity of the initial site to reach 2.5 GW. The latest announcement in the second quarter of 2025 disclosed that the company has acquired adjacent land and submitted a 1 GW grid connection application, raising the total potential power capacity of the park to an astonishing 3.5 GW, ranking it among the largest data center sites in the world.

Scale and Location Advantages:

AI supercomputing service providers prefer centralized facilities to achieve economies of scale and performance advantages. Helios perfectly fits this model as a single scalable campus. Its location in West Texas allows access to the cheapest and most reliable electricity resources in the United States. Crucially, Galaxy is investing in building long-distance fiber optic networks to ensure a transmission delay of 10-15 milliseconds for the Dallas/Fort Worth metropolitan area. This sets Helios apart from the growing number of pure AI training facilities—its low-latency connectivity feature unlocks AI inference use cases, thereby ensuring premium pricing capability.

Design for the Future:

Any data center currently under construction faces the risk of becoming outdated within a few years. Galaxy mitigates this risk through a phased development plan, allowing for the integration of cutting-edge technology during each new construction cycle. This includes advanced cooling solutions such as direct chip liquid cooling, which is crucial for the next generation of GPUs. The 10 million gallon freshwater reservoir on-site supports these critical cooling needs.

(4) CoreWeave Partnership

The collaboration with CoreWeave is the most important validation of the Galaxy AI data center strategy. In the second quarter of 2025, CoreWeave has committed to leasing all 800 megawatts of total power currently approved for Helios.

Transaction Economics:

Its 15-year triple net lease agreement is highly attractive. The first batch of 600 megawatts of electricity is expected to generate approximately $720 million in revenue annually (including a 3% annual escalation clause). Due to the use of a triple net lease structure (where the tenant bears all operating expenses), this revenue is expected to translate into EBITDA with a profit margin of up to 90%.

Risk Mitigation and Value Verification:

This milestone agreement achieves several key objectives. First, it provides long-term visibility into predictable cash flows, reducing Galaxy's financial risk. Second, it strongly validates Galaxy's operational capabilities, establishing the company as a reliable partner. This is crucial for attracting other hyperscale tenants—who prefer partners with a proven track record.

3、Galaxy Traditional Business: A Profitable Cornerstone with Synergistic Effects

The common bearish view regarding Galaxy believes that its traditional encryption business is a negative asset that increases volatility and risk. This perspective is a misunderstanding. In fact, Galaxy's digital asset business is a highly profitable, market-leading entity that provides capital and credibility synergies for its other businesses.

The Galaxy digital asset business consists of two main units: global markets (including institutional trading, lending, and investment banking services) and asset management and infrastructure solutions (including a series of asset management products and on-chain services such as staking).

The financial data for the second quarter of 2025 confirms the strong profitability of the business:

After the adjustment of the digital asset sector, the gross profit reached 71.4 million USD, a month-on-month increase of 10%;

The global market outperformed the benchmark, with institutional loan accounts growing by 27% to $1.1 billion, indicating an increase in demand for its credit products.

The investment banking business demonstrates the strength of M&A advisors, as Bitstamp's exclusive financial advisor in its acquisition by Robinhood.

The total assets of the asset management and infrastructure solutions platform increased by 27% quarter-on-quarter to nearly 9 billion USD.

The balance sheet for the second quarter shows $1.18 billion in cash and stablecoins, as well as $1.27 billion in digital assets (primarily BTC and ETH).

The digital asset business of Galaxy not only generates cash flow but also strengthens its balance sheet, enabling the company to self-fund the significant equity contributions required for the construction of Helios. Furthermore, this business segment has demonstrated its capability to execute large-scale complex transactions—such as the recent sale of over 80,000 bitcoins (worth over $9 billion) to a single client. All these characteristics reassure potential supercomputing clients that Galaxy is an experienced, reliable, and well-capitalized partner capable of delivering infrastructure projects worth billions of dollars. This synergy has created a strong self-reinforcing loop between the two major business segments.

4. Competitive Landscape: The Leader in the AI Transformation Field

Galaxy Digital is often confused with the group of Bitcoin miners attempting to shift assets towards AI computing custody services. However, the following comparison shows that Galaxy stands out as the most attractive target for investment in this theme. The competitive landscape can be divided into two tiers: companies that have signed AI agreements (such as Core Scientific, TeraWulf) and companies that only claim strategic intentions (such as IREN, Hut 8, Riot). Compared to similar companies that have signed agreements, Galaxy exhibits significant advantages across all key dimensions.

The leading edge of Galaxy in key dimensions is specifically reflected in:

Attractiveness of the Agreement: The lease between Galaxy and CoreWeave has better economics. Its annual rental income per megawatt is higher ($1.8 million compared to $1.4-1.6 million), the EBITDA profit margin is better (90% compared to 75-80%), and it includes a 3% annual rent escalation clause that competitors lack.

Balance Sheet Strength: Galaxy has $1.8 billion in net cash and investments. In contrast, competitors like CORZ and WULF are burdened with significant net debt—CORZ has recently emerged from bankruptcy restructuring, while WULF avoided a similar fate through substantial equity dilution. These competitors' mining operations continue to consume cash flow, while Galaxy's traditional business remains profitable.

Scalability: A single Helios park in Galaxy has a potential capacity of 3.5 gigawatts, which makes its competitors' decentralized and limited power capacity pale in comparison, allowing Galaxy to capture a larger share of future demand.

Strategic Focus: Galaxy has made a strategic decision to completely exit the Bitcoin mining business and focus one hundred percent of its efforts on AI data center opportunities. Competitors are attempting to adopt a hybrid model, spreading their attention and capital between two vastly different businesses.

5. Helios Valuation Analysis

The valuation of Helios data center business should refer to other top publicly listed data center REITs and recent private market transactions. Publicly comparable companies like Digital Realty and Equinix trade at multiples of about 25 times adjusted EBITDA. Private equity mergers and acquisitions of data center assets are similarly achieved at comparable multiples.

Baseline Scenario (only currently approved 800 megawatts):

Assuming that only the currently approved 800 megawatts are leased at an average price of 1.8 million dollars per megawatt. Using a 20x EBITDA multiple, this will generate an enterprise value of approximately 17.28 billion dollars. After deducting approximately 5.73 billion dollars of project-level debt and interest, the corresponding equity value of Helios is approximately 11.54 billion dollars. As we expect this year's EBITDA to be realized in 2028, we apply a discount rate of 12%, resulting in a present value equity value of 8.2 billion dollars, or 24 dollars per share.

Bull Market Scenario (as of FY2026 leasing 1,600 megawatts):

Assuming that the subsequent 800 megawatts of electricity expected to be approved in the fourth quarter of 2025 is leased at an industry average price of 1.6 million dollars per megawatt. A total of 1,600 megawatts will generate approximately 1.63 billion dollars in annualized EBITDA. Applying a multiple of 20 results in an enterprise value of approximately 34.5 billion dollars. After accounting for approximately 11.46 billion dollars of project-level debt and interest, Helios's corresponding future equity value is approximately 21.1 billion dollars. Since we expect the 1,600 megawatts capacity to be fully operational by 2030, we apply a higher discount rate of 16% to account for additional execution risk. This results in a current equity value of 10.01 billion dollars, or a value of 29 dollars per share.

The current trading price of GLXY is approximately $24 (as of September 2, 2025). The baseline scenario for the Helios project alone has already reached a per-share valuation of $24. Our valuation does not yet include the traditional digital asset business profits of Galaxy. Bullish recently successfully completed an IPO with a valuation of $5.4 billion, despite reporting a net loss in the first quarter of 2025. If the valuation of Galaxy's digital asset business is close to Bullish's IPO valuation, this alone could add about $8-10 to the per-share value.

6. Key Risks and Mitigation Factors

(1) CoreWeave Tenant Concentration and Credit Risk

The most prominent bearish argument lies in the concentration risk associated with the single-tenant CoreWeave, as well as the doubts about its credit reliability arising from its debt burden and lack of investment-grade rating.

Risk Mitigation: CoreWeave's business model has high revenue visibility, with 96% of its revenue coming from long-term commitment contracts. Its debt primarily consists of delayed withdrawals from term loans, specifically used for financing growth capital expenditures based on signed customer contracts. This credit has been fully underwritten by mature investors like Blackstone—who led significant financing arrangements for CoreWeave. Additionally, CoreWeave has built a lasting moat through its strategic alliance with NVIDIA, allowing it to have priority access to the latest GPUs and is the only "Neocloud" operator capable of meeting the scale demands of top AI labs like OpenAI.

(2) Project Execution and Timeline Risks

The renovation and expansion of Helios is a complex multi-billion dollar infrastructure project with significant execution risks.

Risk Mitigation: The Galaxy management team, particularly Chief Investment Officer Chris Ferraro, has deep expertise in project financing and capital markets to mitigate this risk. The company's strong balance sheet, recently bolstered by approximately $500 million in financing, provides significant financial cushioning for unexpected costs or delays. The phased development strategy reduces risk by breaking projects down into manageable stages.

(3) Regulation and Grid Risks

Future expansions that exceed the currently approved capacity may face scrutiny or delays from the Texas grid operator ERCOT, which is closely monitoring new large load connection requests.

Risk Mitigation: Galaxy's existing 800 megawatts of approved access capacity is a substantial de-risking asset, shielding it from the major bottlenecks faced by new projects. The approved power has been secured. Furthermore, compared to more restrictive jurisdictions, Texas regulators generally have a pro-business and anti-regulatory stance, which provides significant benefits for future growth.

7. Conclusion

In summary, Galaxy Digital is an undervalued investment opportunity. The market continues to assess GLXY through a narrow lens of volatile encryption currency proxies, failing to recognize its fundamental transformation into a top AI infrastructure provider.

The core of this investment thesis lies in the Helios data center—this world-class asset achieves risk hedging through a landmark 15-year triple net lease signed with supercomputing giant CoreWeave. This partnership not only ensures a predictable high-margin revenue stream but also validates Galaxy's position as a trusted partner in realizing its ambitious future expansion plans.

Our valuation analysis indicates that the Helios assets alone have supported the current stock price. Its profitable traditional digital asset business continues to distinguish it from other "AI transformation" competitors, prominently reflected in its fortress-like balance sheet, multiple uncorrelated revenue streams, and a highly focused management team. Although there are risks related to tenant concentration and project execution, Galaxy's experienced management and robust financial position form an effective mitigation. As the company executes its clear roadmap and the market gradually digests the scale and stability of Helios's cash flow, we expect its stock to undergo a value re-evaluation.