Key Takeaways
- • Michael Novogratz, founder and CEO of Galaxy Digital, told analysts on a conference call following Galaxy's third-quarter results that the credit market is near "peak nervousness" over AI spending and that "time is going to heal this thing."
- • Yields on CoreWeave's junk bonds recently surged to levels usually signaling distress after a co-founder said the AI cloud provider was exploring investment-grade borrowing, raising broader questions about how AI companies will fund themselves.
- • Galaxy reported Q3 net income of $323 million, or 66 cents a share, down about 36% year over year, on revenue of $8.06 billion versus a Bloomberg survey estimate of $7.8 billion.
- • Novogratz cited Meta's plan to raise $98 billion in equity for AI spending and Anthropic's planned IPO as signs of relief, and a potential end to the Iran war as another stabilizing factor.
- • Galaxy's pipeline of AI data-center capacity exceeds 5.7 gigawatts, with ongoing talks with big tech firms about becoming tenants.
Summary
Michael Novogratz, billionaire founder and CEO of Galaxy Digital Inc., said anxiety in global credit markets over AI spending is on the verge of easing. Speaking on a conference call on Tuesday following the release of Galaxy's third-quarter results, he said, "We have indigestion in the credit market. It is probably close to peak nervousness. There's not an easy path out, but I think time is going to heal this thing," according to Bloomberg.
The stress is centered on AI infrastructure financing. Yields on CoreWeave Inc.'s junk bonds recently surged to levels usually signaling distress after the company's co-founder said the AI cloud computing provider was exploring ways to borrow in investment-grade debt markets, raising broader concerns about how AI companies will continue to fund themselves. CoreWeave is a major tenant of Galaxy's Helios facility in Texas. Novogratz pointed to equity issuance as a relief valve, citing Meta Platforms Inc.'s push to raise $98 billion for its AI spending and the planned initial public offering of Anthropic PBC. "More equity, less credit is one way to think about it," he said. "This last week to some degree was good for the credit markets because we saw this massive amount of equity." He also argued that a potential end to the war in Iran could ease pressure on the Federal Reserve to raise interest rates to curb inflation, since lower oil prices would follow.
Galaxy reported net income of $323 million, or 66 cents a share, down around 36% from the year-earlier period. Revenue was $8.06 billion, above a $7.8 billion estimate from a Bloomberg survey of analysts, though also lower than a year earlier. Shares rose as much as 8.3%. Its data-center unit generated adjusted gross profit of $79 million and adjusted EBITDA of $69 million, according to the company. Galaxy has converted its Bitcoin mining assets into data centers supporting AI applications, and its contract with CoreWeave is multi-billion dollar in scope. The company said it has been in talks with big technology firms that could become tenants of future facilities, bringing its total gross power pipeline to over 5.7 gigawatts.
Galaxy's shares remain down almost 60% over the past year amid a prolonged crypto market rout that has hit public digital-asset companies. BTIG, which rates Galaxy a buy, flagged company-specific risks including delays in energizing operations, counterparty risk on high-performance computing tenants, and declines in crypto prices that affect collateral and balance-sheet digital asset values. The bank noted Galaxy has delivered the first 200 megawatts of gross power on schedule this summer.
The stress is centered on AI infrastructure financing. Yields on CoreWeave Inc.'s junk bonds recently surged to levels usually signaling distress after the company's co-founder said the AI cloud computing provider was exploring ways to borrow in investment-grade debt markets, raising broader concerns about how AI companies will continue to fund themselves. CoreWeave is a major tenant of Galaxy's Helios facility in Texas. Novogratz pointed to equity issuance as a relief valve, citing Meta Platforms Inc.'s push to raise $98 billion for its AI spending and the planned initial public offering of Anthropic PBC. "More equity, less credit is one way to think about it," he said. "This last week to some degree was good for the credit markets because we saw this massive amount of equity." He also argued that a potential end to the war in Iran could ease pressure on the Federal Reserve to raise interest rates to curb inflation, since lower oil prices would follow.
Galaxy reported net income of $323 million, or 66 cents a share, down around 36% from the year-earlier period. Revenue was $8.06 billion, above a $7.8 billion estimate from a Bloomberg survey of analysts, though also lower than a year earlier. Shares rose as much as 8.3%. Its data-center unit generated adjusted gross profit of $79 million and adjusted EBITDA of $69 million, according to the company. Galaxy has converted its Bitcoin mining assets into data centers supporting AI applications, and its contract with CoreWeave is multi-billion dollar in scope. The company said it has been in talks with big technology firms that could become tenants of future facilities, bringing its total gross power pipeline to over 5.7 gigawatts.
Galaxy's shares remain down almost 60% over the past year amid a prolonged crypto market rout that has hit public digital-asset companies. BTIG, which rates Galaxy a buy, flagged company-specific risks including delays in energizing operations, counterparty risk on high-performance computing tenants, and declines in crypto prices that affect collateral and balance-sheet digital asset values. The bank noted Galaxy has delivered the first 200 megawatts of gross power on schedule this summer.
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