Galaxy Digital: Crypto Cycles And AI Servers Collide (Rating Upgrade)

Summary Upgrading Galaxy Digital to buy after the recent pullback, as risk-reward has improved and technicals look supportive for a new uptrend. Helios data center transition offers stable, high-margin recurring revenue, reducing reliance on volatile crypto markets and boosting long-term sustainability. Valuation is reasonable at current levels, with potential for 36–37% upside if crypto market sentiment improves. Key risks remain: heavy crypto dependence, Helios execution uncertainty, and potential dilution. I recommend buying at $18.3, not higher. Introduction I have covered Galaxy Digital Inc. ( GLXY ) twice before, once under the ticker symbol GLXY on the TSE calling it a buy and recently as GLXY on the Nasdaq issuing a hold rating . The performances since then are depicted below. GLXY Performance after Buy rating GLXY Performance after Hold rating I did rate them a hold on May 19 but did not sell any shares as I believe the stock has more upside potential this year. After the recent pullback, I do see a more favorable risk-reward ratio in buying GLXY. Therefore, I am upgrading my rating to a buy again. Why I Am Long Again Recent momentum for Galaxy Digital has been halted by the combination of a crypto price correction and the pricing of a new share offering totaling around $500M. Proceeds of the set offering will be used to build out their Helios data center Infrastructure. What I did not cover so far due to length constraints is the Data Center opportunities GLXY has. Therefore, this will be the focus of this article. It is, however, quite significant to the company, as shown in their division of business fields into Digital Assets , which includes Global Markets, Asset Management, and Investment Banking, and Data Centers , which covers their Helios Data Center in Dickens County, TX, initially intended to be used for Bitcoin mining but now being repurposed to host AI HPC services. Demand for data centers is set to grow at almost 300% throughout 2030. Similarly, data center IT CapEx is estimated to grow at a CAGR of 23%, reaching $800B in 2028, per McKinsey. Even if these optimistic assumptions are halved, this would be a very attractive market for Galaxy Digital to enter. GLXY IR Their 15-year agreement with CoreWeave marks a shift in their revenue model. At an estimated $900M annual recurring revenue projected to fully materialize into 2027, they are now less susceptible to crypto price volatility. These revenues are both stable and of a high-margin nature, as GLXY projects 90%+ EBITDA margins for them due to their triple lease agreement structure. Conservatively estimated, this could net GLXY an additional $500M of net income per year. More capacity should be gradually unlocked and a full capacity of 2,500 MW could be reached in 2035, which at a 90% utilization rate and $150 per kW/month could earn them a total of $2.4B in ARR. This could in turn translate to $800-900M of net income from data centers annually, assuming higher depreciation costs causing EBITDA margins to decrease a little bit. This seems to be a much better field of business to operate in rather than Bitcoin mining, and I’m glad they’re transitioning. Bitcoin mining is incredibly dependent on Bitcoin prices and, excluding mining efficiency increases, needs Bitcoin prices to double every four years just to earn the same revenues and profits. Still, one cannot deny the fact that Galaxy’s stock price continues to be very dependent on Bitcoin prices, which drives the broader cryptocurrency market. In my latest BTC analysis, I shared the following: In the short term, though, I’m expecting a slight pullback to $97.5k or, in the worst case, to $93.5k We have now seen Bitcoin retrace to $98k. The worst might be behind us, but I continue to see a case for $93.5k as the worst-case current scenario. Either way, Bitcoin was super quick to regain the psychologically important $100k mark, despite economic and geopolitical uncertainties. In my view, this is clear evidence that the momentum is strong enough to reach further ATHs this year. Bitcoin’s monthly RSI still has room for one further euphoric leap this year, as in all post-halving years, it has reached levels north of 90, whereas we have just seen 75 in 2024, a halving year. TradingView When it comes to valuation, traditional measures only get us so far. But looking at the P/B value, it has come down a little bit over the past few weeks. In my last coverage, it was at 2.7X and is now at 2.2X, which, in my view, is more reasonable and contains a little more room to run to the upside in case of continued crypto market euphoria. Specifically, I could see this value reach levels of 3X during peak investor sentiment, sometime around late Q3 or Q4 this year. This implies a short-term upside potential of 36%. Data by YCharts Since estimates are hard to find, I will do my own scenario analysis, based on FY 2025 and 2026. As long as a big portion of GLXY’s profits stems from cyclical unrealized digital asset gains, they deserve to trade at high-single-digit P/E ratios, considering the unpredictability and the fact that profits vary greatly from true cashflows. As I assume rising digital asset prices in 2025, GLXY’s net income would be boosted significantly by holdings gains as well as higher AUM, trading and lending usage, and advisory. I can imagine these developments to drive net income to around $700M in 2025, giving GLXY a forward P/E of 9.9X, which seems like the stock is neither over- nor undervalued for its 2025 upcoming performance. A continued crypto bull market is therefore already priced in. For 2026, gains or losses from the crypto markets are hard to forecast since it is supposed to be a crypto winter year. That could compromise net income drastically. They could, however, achieve revenues of $1B ($300M from financial services, $700M from Helios), which would put them at a forward P/S ratio of just below 7X, which is also reasonable considering their revenue will become much more predictable and be of high-margin nature. Checking technicals again, I realize that GLXY is trading at a crucial support of CAD25. The 200-day MA is also inching closer and could offer support. If these levels are lost, however, I could see the price moving down toward CAD20 (-20%). GLXY’s recent drop of 30% also falls within its usual range of corrections since 2022. Weekly RSI down to 54 and daily RSI at 45 make me more confident at the start of a new uptrend. From then, it is important that they reclaim the descending trend line starting from their 2021 highs as support. Price has been rejected here three times on the daily chart in the last few weeks. Overcoming this resistance would give them a good foundation for trying to break through the key resistance zone at CAD34-36, which is my new preliminary price target, offering approximately 37% upside. TradingView Risks As mentioned in my prior coverage, GLXY’s core risk remains its heavy dependence on crypto markets. A prolonged pullback in Bitcoin could lead to declining trading activity, lower AUMs, and negative net income. I particularly expect a lot of volatility going into 2026 where Galaxy will have to prove whether they can perform while reporting potentially large unrealized losses on their digital asset holdings. Additionally, Q1 2025’s large loss as well as the Nasdaq listing increase the risk of shareholder dilution. Galaxy truly needs predictable revenues in order to safely be able to fund its costs and future expansions, so taking on debt and issuing a lot of shares is no longer necessary. Proceeds from share offerings are needed to restructure Helios and build it out in order to achieve maximum capacity. While likely, Helios has not proven to be economically viable and has not turned over a dime. This is set to change in the first half of next year but does remain an operational risk, as it is very hard to calculate ROI when investors don’t precisely know about the amount of investment needed and whether projected capacity, revenues, and profits will truly materialize. Conclusion I am upgrading Galaxy Digital back to a Buy, though with less conviction than during the April lows. The recent pullback did improve the risk-reward ratio, but it is not as favorable as it was when prices hit $8-$12. Still, Galaxy Digital Inc. offers exposure to growing AI adoption, cryptocurrency financial services, and digital asset holdings growth. At today’s prices, investors get the above-named sections for a fair valuation and decent technicals. Helios has the potential to make GLXY’s financial profile more sustainable and less volatile over the coming years. This remains a 2025-focused investment, but I will continue to monitor both the Helios rollout and broader crypto dynamics closely. Depending on how these develop, Galaxy Digital could transition into a longer-term position for me, heading into 2026 and 2027. Disclaimer: At the time of writing this article, GLXY’s stock price is at $18.3. I recommend buying at this price, not any higher.

Source: Seeking Alpha