A lot of things can change in 3 or 4 years.
There was a time, a few years ago, when people were making a big deal about the amount of energy it took to run crypto networks. That was something that led to the creation of some interesting memes.
Since that time, OpenAI and other major technology players have changed the game. With the massive expansion of LLMs, along with other generative AI products, the Bitcoin energy discussion is almost non-existent.
In fact, we are seeing a massive shift to something away from this.
Galaxy Digital is showing where the money in the future will be. The era of dumping massive resources into Bitcoin mining is waning. There is a new game in town and it is AI.
Galaxy Digital, headed by Mike Novogratz, is a long time player in the crypto world. This is one company that headed up a number of projects, with its CEO being one of the top voices during a time when there were many detractors.
It seems the company is now looking past crypto.
Mike Novogratz’s Galaxy Digital has secured a $460 million private investment from one of the world’s “largest asset managers” to accelerate the transformation of its former Bitcoin mining site in Texas into an AI data center.
This is a shift away from something that was profitable over the years. Bitcoin mining, for major firms, did rather well. That said, it appears this will pale in comparison to what AI is offering.
It is no secret that data centers will be the centerpiece of the economy. We are looking at a time when trillions is required to develop these. AI models use a lot of compute for training, something that is dwarfed by inference. That is likely to be a few orders of magnitude larger than all of the training compute.
We are talking about an industry denominated by the billions. This is how the totals rapidly moving into the trillions. Companies like Meta, Google, Tesla, xAI, and OpenAI are buying billions of dollars worth of GPUs. This is leading Nvidia to have an annual profit of close to $100 billion.
For Galaxy, this is simple math. The conversion will be a printing press. A couple billion dollars put in will pull out a great deal more.
The new investment follows Galaxy’s $1.4 billion loan facility secured in August to fund roughly 80% of the Helios buildout. Under a 15-year contract with CoreWeave, an AI cloud infrastructure provider, Galaxy will supply compute power for AI and high-performance computing workloads starting in 2026.
The company expects to generate over $1 billion in annual revenue from the partnership, totaling about $15 billion over the term.
Generating over $1 billion in annual revenue is a healthy return. Spanning the partnership period, $15 billion at a 33% margin would net $5 billion in profits. It is likely the margin is much higher than that.
Bitcoin mining is seeing record hashrate. The difficulty is such that earning the block rewards is affecting business.
An increase in difficulty is pushing many firms to shift their focus. With the guaranteed money provided by AI data centers, this is not a tough decision.
The move comes amid a growing trend of crypto-native firms pivoting toward AI infrastructure amid record Bitcoin hashrate, which reduces the chances of miners earning rewards.
There is a near infinite need for AI related compute. It is only growing as more applications arrive, necessitating the need for more inference. The number of prompts are exploding.
So why take the risk?
Novogratz and Galaxy see the potential. This will likely be a move that many firms choose as capital is the main driver of economic output as digital grows. It is going to present new opportunities as the need for AI services grows.
Those providing infrastructure will be in ideal position.
