Galaxy Digital's Mega Deal with CoreWeave: A Game-Changer in the Making!

Holy smokes, folks! Galaxy Digital just dropped a bombshell with a 15-year AI hosting deal with CoreWeave, and it's got everyone buzzing! H.C. Wainwright & Co.'s top dog, Mike Colonnese, is calling this move a total game-changer for the company.

This epic deal was unveiled during Galaxy Digital's Q4 2024 earnings call, and it's nothing short of mind-blowing. Galaxy is set to transform a whopping 200 MW of its Helios mining facility in West Texas into a powerhouse hosting 133 MW of critical IT load for CoreWeave's GPUs. Talk about a power move!

Get this: the contract is expected to rake in a staggering $4.5 billion over its lifetime, or about $300 million each year. That's a jaw-dropping 70% of Galaxy's total 2024 revenues, according to the analyst. And the terms? They're "very favorable" compared to other high-performance computing deals, with an estimated $2.26 million per MW in annual revenue at roughly 90% EBITDA margins. Cha-ching!

Significant growth potential at Helios

Now, hold onto your hats because the upfront retrofit costs are expected to be between $1.46 billion and $1.73 billion. But don't sweat it, most of that will be covered by project debt. And guess what? CoreWeave will handle the ongoing electricity and operating expenses, keeping Galaxy's recurring costs low. Colonnese also spilled the beans that Galaxy has a whopping 600 MW of additional capacity at Helios, ready for future expansion. He said:

"Applying current data center valuations to contracted capacity for Galaxy's new data center business, we estimate the segment could eventually be worth over $3.5B, a valuation that is far from being priced into shares."

Colonnese is sticking with a Buy rating on Galaxy's stock, but he's lowered the price target from C$35 to C$30. The new target reflects about a 40% discount to traditional finance broker dealers, considering "Galaxy's smaller scale and narrow focus on digital assets," and a 40% discount to Coinbase.

Q4 recap: exceeded expectations

But wait, there's more! Galaxy absolutely crushed it in Q4. Revenue hit a mind-blowing $698.1 million, up a staggering 388% from the previous quarter. They blew past the analyst's model of $248.2 million and the consensus estimate of $202.7 million.

The company reported a $560.6 million realized gain on digital assets in the quarter, but also a $84.9 million realized loss on investments. Total operating expenditure soared to $440.3 million, up 137% quarter-over-quarter, partly due to a $166.3 million one-time charge related to a settlement with the New York Attorney General over its involvement with LUNA.

Net income/EPS of $174.3 million/52 cents also smashed the analyst's estimate of $94.2 million/28 cents. Galaxy Digital is on fire, and this deal with CoreWeave might just be the fuel to keep the flames burning bright!