Galaxy Digital Update and Valuation
I hope you're all weathering the storm in the East. I came across this research report on Galaxy Digital and found the analysis spot-on, very comprehensive, and compelling. As a reminder, Galaxy Digital has two main businesses: the AI High-Capacity Computing (HPC) data center in Texas, called Helios, and its Digital Asset investment bank. The valuation analysis considers both businesses and uses a sum-of-the-parts approach to arrive at a $80-per-share (PS) price target. We fully agree at SWCM. Stay long or add to positions on any weakness.
Galaxy Digital comprehensive valuation:
Galaxy Digital is up nearly 30% over the past month, making it one of the top-performing crypto equities. A mid-January rally took shares to $34.70 before pulling back to ~$28. But here's what's worth paying attention to: even our base case isn't close to being priced in at current levels, let alone the new bull case that just emerged. On January 15, @galaxyhq secured ERCOT approval for an additional 830 MW at Helios, doubling total approved capacity to over 1.6 GW. That's a material expansion and it landed on top of a valuation that was already cheap.
Let's walk through it.
The Power Constraint
Why does doubling capacity matter so much? Power availability and interconnection are the binding constraints for AI data centers right now. You can have the best chips, the best customers, the best location, but if you can't plug into the grid, none of it matters. Goldman Sachs estimates $720B in grid spending is needed through 2030 just to keep up with data center demand, and those transmission projects take years to permit and build.
Source: Goldman Sachs
The CoreWeave Foundation
Helios is being rebuilt into a scaled AI-HPC data center campus.
@CoreWeave has already committed to take all currently approved power across three phases, totaling 800 MW of gross capacity under a 15-year term. The new ERCOT approval? That's incremental. It extends Galaxy's contracting runway beyond CoreWeave, opening the door to additional tenants and additional revenue streams. And critically, Galaxy reiterated they're on track to deliver initial power in early 2026. A key catalyst.
The Cash Flow Profile
Here's where it gets interesting.
Anchoring on guided economics and base-case assumptions, Helios at full scale of 1.6 GW implies a contract-life-average unlevered free cash flow of roughly $1.2B/year once fully ramped. Our theoretical 1.6 GW FCF profile shows heavy capex through 2030, with the project turning FCF positive around 2031-2032 and then generating substantial cash flows for the remainder of the contract life.
Valuation Scenarios
Running the updated framework across scenarios:
The 1.6 GW ERCOT case, which is now approved and utility-contracted, implies roughly $80/share of equity value at full build, and roughly $40/share in present value terms, assuming completion in 2031. By itself, that's above today's share price. And it roughly doubles our prior Helios contribution to the sum-of-parts valuation.
Helios Facility overview and video
The Regulatory Tailwind
There's more than just data centers here. Galaxy's core Digital Assets franchise accounts for ~60% (~$36/share) of our base-case sum-of-parts valuation. And the US crypto market structure progress is creating a meaningful tailwind. CLARITY passed the House last summer and is now in Senate negotiations. If both chambers align, it goes to the President. Meanwhile, the OCC has been reducing friction for banks to engage in permissible crypto activities: custody, stablecoin services, execution, and riskless principal transactions. This should broaden the institutional counterparty set and directly support Galaxy's Digital Asset segment.
The Innovation Angle:
Beyond data centers and regulatory tailwinds, Galaxy is quietly building infrastructure for the next generation of capital markets.
On-chain capital markets: Galaxy is pioneering institutional-grade blockchain rails. In September, it became the first U.S.-listed company to tokenize its SEC-registered equity on @Solana. In December, J.P. Morgan arranged Galaxy's commercial paper issuance on-chain, one of the first debt issuances ever executed on a public blockchain, with Coinbase and Franklin Templeton as investors and settlement in USDC. This isn't proof-of-concept territory anymore.
GalaxyOne: Launched in October, GalaxyOne is Galaxy's consumer platform combining crypto, U.S. equities, and a 4% APY cash account (8% for accredited investors), all in one app. The roadmap includes staking, business accounts, and expanded brokerage products.
These initiatives position Galaxy at the intersection of TradFi and DeFi. Not just as a crypto-native firm, but as infrastructure for tokenized capital markets.
The Full Picture:
Layer the Helios uplift into the sum-of-parts alongside base case Digital Assets and Treasury segments, and our total valuation climbs to now above $80/share. Against current share price close of $31.90, this implies meaningful upside if execution continues.
The next leg of performance depends on three things:
- Contracting for a newly-approved tranche: who's next after CoreWeave?
- Visible construction progress: execution into first power remains key
- CLARITY progress: Senate passage would be a clear catalyst for the entire Digital Assets segment
Risks: To be clear about what could go wrong:
- Execution risk at Helios: construction and commissioning delays are always possible.
- Tenant concentration: CoreWeave is the anchor but diversification matters long-term
- Conglomerate discount: Digital Assets, Data Centers, and a volatile Treasury sleeve all in one entity creates complexity for the market to value
These are real considerations. But at current levels, the risk/reward looks attractive for $GLXY
Disclaimer:
The information in this material is for general information only and is that of the author, not a recommendation or solicitation to buy or sell investment products. This material was developed and produced by James Sullivan, who is not affiliated with the named broker-dealer. Always consult a tax or legal advisor to review your situation comprehensively. Dollar-cost averaging will not guarantee a profit or protect you from loss, but may reduce your average cost per share in a fluctuating market. Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment. It does not take into account the effects of inflation and the fees and expenses associated with investing. A diversified portfolio does not assure a profit or protect against loss in a declining market.