AI Data Center Buildout And Tokenization Will Unlock Major Long Term Upside

Catalysts

About Galaxy Digital

Galaxy Digital is a diversified financial services and infrastructure platform focused on digital assets, tokenization, and institutional crypto adoption.

What are the underlying business or industry changes driving this perspective?

• Helios is expected to transition from construction to a rapidly scaling, long-duration cash flow asset. Initial modest inflows are expected to ramp toward hundreds of millions of dollars per quarter, which could materially lift consolidated revenue and earnings power.
• The AI and data center build-out, while volatile, is driving sustained demand for high quality, power-secure campuses like Helios. This is positioning Galaxy to pursue attractive economics and improve margins as it secures incremental megawatts and potentially diversifies tenants.
• Growing institutional and TradFi engagement in digital assets, including tokenization initiatives and structured infrastructure partnerships, supports steady expansion of assets on platform. This should increase recurring revenue and stabilize earnings through cycles.
• Galaxy’s early investments in infrastructure capabilities such as GK8 custody, staking, and tokenization tooling position it to capture fee streams as tokenized assets and on-chain capital markets scale. This supports higher fee-based revenue and more resilient net margins.
• Longstanding venture and balance sheet exposure to core crypto ecosystems, combined with a disciplined process of converting illiquid holdings into liquid assets over time, provides embedded upside optionality that can translate into outsized gains and stronger net income in bull phases.

Assumptions

This narrative explores a more optimistic perspective on Galaxy Digital compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Galaxy Digital's revenue will grow by 75.3% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 0.5% today to 0.2% in 3 years time.
• The bullish analysts expect earnings to reach $310.5 million (and earnings per share of $0.73) by about December 2028, up from $119.2 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $-116.7 million.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 59.3x on those 2028 earnings, up from 43.1x today. This future PE is greater than the current PE for the CA Capital Markets industry at 25.2x.
• The bullish analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.21%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The current enthusiasm and heavy capital deployment into AI and data centers could prove to be a cyclical bubble rather than a durable secular trend. This could lead to a sharp pullback in demand for high power campuses like Helios, which would weaken expected cash flows and reduce revenue growth from the infrastructure segment, ultimately pressuring earnings.
• Galaxy’s large portfolio of illiquid venture and token-related holdings is marked based on limited market activity and pricing committee judgments. If long-term liquidity remains thin or sentiment toward digital assets deteriorates, write-downs and slower realizations could materially drag on net income and compress net margins.
• Tokenization and custody, including GK8 and AllUnity, are still early stage with unclear regulation, market structure and trading venues. If adoption proceeds more slowly than expected or large incumbents such as BlackRock dominate the value chain, Galaxy’s infrastructure strategy may under-monetize, limiting fee-based revenue and margin expansion.
• Galaxy’s strategy depends heavily on securing and retaining specialized human capital across trading, infrastructure, and tokenization. If industry competition, regulatory uncertainty or macro conditions make hiring and retention structurally harder, execution risk could rise, constraining operating scale and keeping earnings volatility elevated.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Galaxy Digital is $60.0, which represents up to two standard deviations above the consensus price target of $47.82. This valuation is based on what can be assumed as the expectations of Galaxy Digital's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $60.0, and the most bearish reporting a price target of just $26.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $127.8 billion, earnings will come to $310.5 million, and it would be trading on a PE ratio of 59.3x, assuming you use a discount rate of 9.2%.
  
• Given the current share price of $26.75, the analyst price target of $60.0 is 55.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.