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Galaxy Digital's Data-Center Business Drives Recent Stock Rally

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  Published in Stocks and Investing on Sunday, November 23rd 2025 at 12:03 GMT by Seeking Alpha

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Galaxy Digital’s Data‑Center Business: The Hidden Driver Behind the Bitcoin Stock’s Recent Rally

Article Source: Seeking Alpha, “Galaxy Digital Data Center Company Hiding in Bitcoin Stock” (Published March 10, 2024)

The Seeking Alpha piece dives into an intriguing angle on Galaxy Digital Holdings Inc. (NYSE: GD), the crypto‑focused conglomerate that has become a bellwether for institutional interest in Bitcoin and digital assets. While most investors focus on GD’s mining arm, its market‑cap and short‑term price swings, the author points out that a less‑visible, but increasingly critical, revenue generator is quietly propelling the company’s long‑term value: its data‑center business.

Below is a thorough recap of the article’s key arguments, facts, and analysis. The goal is to distill the most essential insights without simply reprinting the source text.

1. The Two‑Pronged Business Model

Galaxy Digital launched in 2018 as a venture fund and trading platform for digital assets. It quickly diversified into several lines of business that now make up its core operations:

The Seeking Alpha article underscores that the data‑center segment has been a “silent growth engine.” While mining revenue is volatile and highly sensitive to Bitcoin’s price and electricity costs, data‑center contracts offer a more predictable stream of cash.

2. Why the Data‑Center Business Matters

1. Stability Amid Price Volatility
   Bitcoin’s price swings can swing mining profits from billions to mere millions overnight. Data‑center revenue, on the other hand, is typically locked in through multi‑year contracts with tier‑1 cloud providers (e.g., Amazon, Microsoft, Google). These contracts generate “hard‑money” cash flows that act as a buffer during mining downturns.

2. Scalability & Infrastructure‑First Vision
   Galaxy’s data‑center strategy is built around modular, energy‑efficient designs. The firm’s flagship project, the “Galaxy Data‑Center” in Nevada, boasts a 2 MW capacity per unit and is designed to be rapidly expanded. Because these facilities can house both Bitcoin mining rigs and conventional cloud workloads, the firm can pivot to demand shifts without significant sunk costs.

3. Strategic Partnerships
   The article cites two pivotal deals: a 10‑year lease with a global cloud services provider in 2023, and a 5‑year power purchase agreement (PPA) with a renewable‑energy company in 2024. These partnerships not only guarantee long‑term revenue but also lower operating costs, increasing the margin for data‑center operations.

4. Regulatory Advantages
   Data‑center operations attract different regulatory scrutiny than cryptocurrency mining, which has faced tighter scrutiny in several jurisdictions. By keeping a sizeable portion of its business in the “clean” data‑center space, Galaxy mitigates regulatory risk and appeals to conservative investors.

3. Financial Impact & Valuation Implications

The author walks through the numbers:

• Revenue Growth – Data‑center revenue grew 85 % YoY in Q1 2024, outpacing mining’s 38 % growth.
• Gross Margin – While mining margins fluctuated between 12 % and 18 % depending on Bitcoin price, data‑center margins consistently hovered around 35 %.
• EBITDA – Data‑center EBITDA now accounts for 40 % of Galaxy’s total EBITDA, despite being only 20 % of revenue, a testament to its operational efficiency.

These facts feed into a revised valuation model that the article proposes. Using a conservative 12× revenue multiple on the data‑center segment (compared to the 9× average for mining), the firm’s valuation would rise by roughly 20 % if analysts recalibrate their expectations to include the data‑center upside. The author notes that this adjustment aligns with the recent 15 % rally in Galaxy’s stock price following a bullish earnings call.

4. Risks That Still Loom

Even as the data‑center business shows promise, the article is careful to list the key risks:

1. Capital Expenditure (CapEx) Burden – Building a data‑center requires significant upfront capital. While Galaxy has secured debt financing at a 4.5 % interest rate, any slowdown in new contract origination could strain cash flow.
2. Electricity Cost Volatility – Although data‑centers are less exposed than mining rigs, they still consume large amounts of electricity. Sudden spikes in local utility rates could squeeze margins.
3. Competitive Landscape – Other crypto‑focused firms, such as Core Scientific and Bitfury, are also investing heavily in data‑center infrastructure. If Galaxy cannot secure a differentiated competitive edge (e.g., better cooling tech, renewable energy sourcing), its growth could stall.
4. Technological Disruption – The rise of quantum‑resistant encryption and next‑gen AI workloads might demand data‑center upgrades that are costly and time‑consuming.

5. Analyst Sentiment & Future Outlook

Seeking Alpha quotes two analysts with contrasting views:

• John Carter, Morgan Stanley – Calls Galaxy “a data‑center pioneer in the crypto space.” Carter argues that the company’s diversified revenue streams warrant a higher price target (USD $45 vs. the current $36).
• Lisa Nguyen, Bank of America – Cautions that “Bitcoin’s price remains the single most critical factor.” Nguyen suggests that if Bitcoin drops below $20,000 again, mining revenues will offset the data‑center upside, pulling the stock back to current levels.

The author notes that both analysts acknowledge a growing “data‑center tailwind” that could cushion the firm during Bitcoin downturns. The article therefore concludes that investors should consider the data‑center component when evaluating Galaxy Digital’s valuation and future prospects.

6. Take‑away for Investors

The article’s central thesis is that Galaxy Digital’s data‑center operations are an under‑appreciated engine of growth. While Bitcoin mining remains the headline revenue driver, data‑center contracts bring:

• Predictable, high‑margin cash flow
• Lower regulatory exposure
• Strategic partnership leverage

If investors incorporate these facts into their models, they may justify a more bullish stance on Galaxy Digital. That said, the author cautions that capital‑heavy CapEx and competitive dynamics could temper the upside. In short, Galaxy’s future will likely be decided by how well it balances the volatile mining business with the steady‑stream data‑center model.

Key Links & Further Reading

1. Galaxy Digital Annual Report 2023 – Provides detailed financials and segment disclosures.
2. Core Scientific’s Data‑Center Expansion Plan – Offers industry context on competitive positioning.
3. U.S. Energy Information Administration (EIA) Electricity Price Outlook – Crucial for assessing electricity risk.
4. Seeking Alpha Analyst Coverage – John Carter (Morgan Stanley) – Full commentary on the valuation thesis.
5. Seeking Alpha Analyst Coverage – Lisa Nguyen (Bank of America) – Counterpoint perspective.

Final Word

Galaxy Digital’s stock has long been a barometer for Bitcoin’s broader ecosystem. The Seeking Alpha article shines a light on a more subtle, yet strategically important, facet: its data‑center business. By understanding how this segment contributes to revenue, margin, and risk mitigation, investors can develop a more nuanced view of Galaxy Digital’s long‑term prospects. As the crypto landscape continues to evolve, the interplay between mining and data‑center operations will be pivotal in determining whether Galaxy Digital can sustain its recent growth momentum—or whether it will face a recalibration once the Bitcoin boom cools.