Galaxy Digital: A Bold Investment Choice For High-Risk, High-Reward Seekers

Summary Galaxy Digital is expanding into AI infrastructure while maintaining its core cryptocurrency business. GLXY differentiates itself from peers like IREN and CoreWeave by not abandoning crypto amid its AI pivot. Recent performance has lagged since October despite solid earnings, with investor concerns persisting. The investment thesis centers on dual exposure to both AI and cryptocurrency growth opportunities. Galaxy Digital ( GLXY )(GLXY:CA) is a cryptocurrency company that plans to add a significant Artificial Intelligence ("AI") infrastructure business. Unlike IREN Limited ( IREN ) and CoreWeave ( CRWV ), it intends to continue investing in cryptocurrency and growing that business after establishing its AI infrastructure business. The stock has not done very well since late October for several reasons. First, this investment may turn off investors unfamiliar with the cryptocurrency industry. As I get deeper into this article, I will mention some terms that some in traditional finance may never have heard of, such as staking and Tokenization. Before considering buying this company, become familiar with the cryptocurrency industry; otherwise, you will likely fail to understand Galaxy Digital. Next, investors have been concerned that several significant cryptocurrencies have been selling off since the beginning of October. Galaxy remains heavily reliant on cryptocurrency trading to generate revenue, making it highly susceptible to cryptocurrency market fluctuations. The downdraft in cryptocurrency prices may show up in reduced revenue in the company's fourth quarter. Data by YCharts The market was also displeased in the latest quarter by a massive jump in Gross Transaction Expenses, the equivalent of the cost of goods sold for a typical company; the jump in third-quarter 2025 Gross Transaction Expenses caused total operating expenses to rise 228% to $28.67 billion. Galaxy Digital Third Quarter 2025 Earnings Press Release. Transaction expenses can increase rapidly when trading volume jumps, which occurred in the third quarter. Galaxy Digital's third-quarter 2025 press release stated: Galaxy's digital asset trading volumes increased 140% in the quarter, reaching all-time highs and outpacing broader market growth amid stronger sentiment and client activity. This included the execution of a $9 billion notional bitcoin sale, or over 80,000 bitcoin, on behalf of a client in the quarter, and robust spot execution for digital asset treasury companies. The sheer size of Gross Transaction Expenses and operating expenses may have shocked some investors and caused an adverse reaction in the stock price. Despite the rise in Gross Transaction and Total Operating Expenses, the 140% increase in trading volumes is suitable for the company because the 231% increase in revenue exceeds the 228% increase in Total Operating Transaction Expenses, resulting in higher profits. The company's net income increased from a $33.33 million loss in the previous year's third quarter to $505.057 million this year. Additionally, although the company maintains it is on schedule to deliver 133 megawatts ("MW") in the first half of 2026, the market may have expected the Helios investment to generate revenue sooner. Galaxy's AI infrastructure revenue has the potential to be more stable and higher-margin than its cryptocurrency trading business. Hence, the market wants to see it generating revenue sooner rather than later. Unfortunately for Galaxy Bulls, "being on schedule" is not soon enough for some investors, which may be why the stock sold off after earnings. Galaxy Digital Third Quarter 2025 Earnings Press Release. Following the cryptocurrency selloff and potential initial investor concern over higher-than-expected Gross Transaction Expenses in its third fiscal quarter ("FY") 2025 and a slower-than-expected return on investment ("ROI") from its data center investment, the stock dropped by 12.9% from its 52-week high of $45.92 the day after reporting its third-quarter earnings to $37.34. It later drifted down another 33.26% to $24.80 by the December 2 close. Data by YCharts Despite the current gloom and doom surrounding the company, there are reasons to be bullish on the stock, including a shift away from trading to recurring revenue streams in its Digital Assets business and in its new AI infrastructure business. Generating new recurring revenue The Galaxy Digital AI infrastructure project, Helios, is a former Bitcoin mining site on a campus in Texas that Galaxy Digital acquired in late 2022 . On March 28, 2025, Galaxy Digital announced in its fourth-quarter and full-year 2024 earnings results that it had signed a 15-year lease agreement on November 7, 2024, with CoreWeave to deliver 133 megawatts of critical IT load for AI and HPC operations Management expects its CoreWeave deal to generate high-margin recurring revenue , specifically $1 billion in annual revenue at an estimated 90% EBITDA (earnings before interest, taxes, depreciation, and amortization) margin. Helios gets most of the hype for its potential to transform Galaxy's business. However, investors shouldn't dismiss the company's Digital Assets segment. One of the company's pathways to generating a recurring revenue is through a process called Tokenization—turning traditional assets like real estate, stocks, or funds into digital tokens on a blockchain. Galaxy got into this business when it finalized the acquisition of GK8 on February 23, 2023, for approximately $44 million. Galaxy is in the process of creating a business to tokenize assets using GK8's "Tokenization Wizard" platform and to serve as a custodian of the assets on the blockchain. The company will generate revenue through custodian fees based on Assets Under Management ("AUM") and through licensing GK8 to other financial institutions and partners, thereby generating steady, annual Software-as-a-Service (SaaS) fees. Galaxy can also generate additional fees as an offshoot of its tokenization business, which includes staking, asset management, and smart contract management fees. Let me briefly discuss staking, since it is a crypto activity not everyone is familiar with. This (staking) business may be difficult to understand because it is purely a crypto concept. The following Coinbase article defines staking: Staking is a way to earn rewards by putting your crypto to work on a blockchain network. In return for helping the network run smoothly and securely, you receive more of the cryptocurrency you're staking. The rewards come from the network itself—your crypto isn't being lent out. It's a safe, simple and popular way to grow your crypto while holding. When customers stake their crypto assets with Galaxy, it generates high-margin, recurring fees for the company. The other concept to understand and follow in Galaxy's results is AUM, the total market value of all the assets that Galaxy holds on behalf of its clients. The more assets under management, the higher the fees the company generates. Galaxy Digital Third Quarter 2025 Earnings Press Release. In the third quarter, it had approximately $9 billion in AUM and $7 billion in Stake under management, generating high-margin recurring fee revenue of $40 million. Suppose it is successful in building out a Tokenization platform. In that case, it will diversify its business into a higher-margin, recurring revenue stream, which the market would likely assign a valuation higher than today's, which relies primarily on volatile trading revenue. When I first heard of Tokenization, I thought it was a business that could be quickly commoditized because the technology behind it is pretty easy to implement. However, I discovered that just because it is technically easy to do doesn't mean it's easy to build a tokenization business, because not every business can establish the legal compliance, security, and market structure required to make institutions comfortable adopting it at scale. An analyst on Galaxy Digital's third-quarter 2025 earnings call noted that BlackRock has been talking up Tokenization lately and is actively developing tokenization technology. He asked the following question of Galaxy management: I was wondering because we heard that BlackRock was looking to build its own technology, and we see -- we can understand that most big banks might see a threat with Tokenization. I was wondering where you see GK8 sitting at in this market? And where do you see custody as a service, but mostly as a fee clipping like when you got smart contract settlement and maybe also AllUnity. So I'd like to see if there's a moat regarding GK8 and if at any moment you see GK8 having its own fierce moment, if I may. Chief Executive Officer ("CEO") Michael Novogratz gave the following response: Listen, the tokenization process itself is not so complicated, right? I think where you're going to see the value over time is connecting the entire infrastructure process, which is like capital raising in some ways, right, figuring out what assets should be tokenized or can be tokenized, and how to distribute those and then where those distributed assets sit in custody. It's kind of a complex web...Nobody is really tokenizing at scale right now. And some of that, I think, will change in the next 18 months. I think once you get clarity from the bill that hopefully gets passed in Washington in the next few months, the market structure bill. Once you also get understanding of where these tokenized security assets will trade, right now, they need to trade on ATSs and there are not a lot of big liquid pools around ATSs. And so all the pieces aren't in place yet for the tokenization world to really explode, but we're really close. In other words, Tokenization is still in its very early stages, and Galaxy is positioning itself to be a significant player once the industry takes off. If the tokenization business does take off, the market will likely value its Digital Assets business much higher than it does today. Up until now, Galaxy has primarily focused on institutional investors. The company decided to diversify its revenue sources from institutional investors to individual investors with the launch of GalaxyOne on October 6, 2025. The press release stated: "We've spent years building institutional-quality infrastructure to serve the world's most sophisticated investors. Now, we're extending that edge to individuals," said Mike Novogratz, Founder and CEO of Galaxy. "Importantly, GalaxyOne advances our mission of becoming a full-spectrum financial services provider that builds trusted, regulated, and accessible products for all market segments." The new platform should serve as a retail distribution network for services on its institutional financial network. GalaxyOne, if successful, should help shift Galaxy's revenue mix from volatile trading profits to more stable, predictable fee-based income from facilitating individual customers lending their stocks, and profiting from the spread between what it earns on institutional loans and what it pays to GalaxyOne high-value individual users on both cash deposits (currently 4.00% APY via an FDIC-insured bank partner) and an investment note for accredited investors (8.00% APY). It will also unify crypto, equities, and cash management on the GalaxyOne platform, enabling cross-selling across financial products. When I first started looking at this company, I thought it would be just like CoreWeave or IREN, Ltd. , former crypto companies that had pivoted to AI infrastructure. However, I was surprised to discover that Galaxy Digital had no plans to wind down or exit its crypto operations, unlike several other former crypto players that have turned to AI infrastructure. At first, I wondered why, because the market often gives crypto players a lower valuation. After researching, I discovered that the market assigns crypto miners and traders a lower valuation due to the volatility of their revenue and profitability. However, suppose Galaxy morphs from a crypto trading company into a financial services company generating high-margin recurring revenue. In that case, the crypto portion of the business may become as valuable as the AI infrastructure portion. Valuation Through the third quarter of FY 2025, Galaxy's Data Centers Segment contributed little to the company's overall results. The company's Digital Assets Platform, which centers on cryptocurrency and comprises trading, asset management, and investment banking, is best valued using the P/TBV metric. The following chart shows Galaxy Digital's Price-to-Tangible-Book Value (P/TBV) is 2.804, above its three-, five-, and seven-year medians, suggesting the market may overvalue the stock. Suppose the stock sold at its three-year median; its price would be $12.61, a 49.14% decline from its December 1 closing price of $24.80, which is its potential downside if the thesis for investing in it fails to play out (especially the AI infrastructure thesis). Data by YCharts The companies it compares best on a P/TBV basis are Coinbase Global, Inc. ( COIN ), Cboe Global Markets, Inc. ( CBOE ), Futu Holdings Ltd. ( FUTU ), and Robinhood Markets, Inc. ( HOOD ). Data by YCharts Company name Business Model P/TBV Galaxy Digital Cryptocurrency Exchange/Financial/Brokerage 2.804 Coinbase Global, Inc. Cryptocurrency Exchange/Brokerage 6.609 Cboe Global Markets, Inc. Traditional Exchange/Market Operator 75.76 Futu Holdings Ltd. International Online Brokerage 7.455 Robinhood Markets, Inc. Retail Brokerage/Trading Platform 13.84 Since Galaxy has the lowest P/TBV among the comparison group, some may consider it severely undervalued relative to similar financial companies. However, other investors may believe the poorer quality of its Tangible Book Value ("TBV") warrants a significant discount. For instance, Cboe and Coinbase hold much of their TBV in highly liquid and stable assets, such as fiat cash, regulated securities, and operational capital. In contrast, Galaxy holds most of its TBV in digital assets (cryptocurrencies) and principal investments, which are subject to extreme, sudden market volatility and can sometimes be illiquid. The higher risk that its assets may rapidly decline in value may validate Galaxy's significant discount in the eyes of some traditional finance investors. As a result, some may consider it fairly valued or even overvalued. Once Galaxy's AI infrastructure becomes fully operational, investors will be able to use Enterprise Value ("EV")/EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) to value the company since the AI infrastructure and data center business model are an excellent fit for that valuation method. However, as of the third quarter, the company is primarily a financial institution with volatile, non-recurring revenue dependent on mark-to-market gains on its balance sheet digital assets, precisely the type of company ill-suited for valuation using EV/EBITDA. As a result, I won't attempt to value Galaxy using EV/EBITDA until AI infrastructure generates a meaningful contribution to the company's revenue. Galaxy Digital's trailing 12-month (TTM) price-to-sales (P/S) ratio is 0.08, which is well below the financial sector median of 3.00, suggesting the market undervalues it. Additionally, its TTM P/S ratio is much lower than that of other publicly traded companies in the crypto and financial space. Some investors may consider it significantly undervalued based solely on the P/S ratio. Data by YCharts Let's see how the comparison looks when comparing forward-looking valuation metrics. I use three-year forward numbers in a three-year forward P/S ratio-to-estimated revenue growth (P/S/G) ratio analysis, as the comparison only makes sense when using Galaxy's FY 2027 estimated year-over-year revenue growth. Seeking Alpha The following table compares the three-year forward P/S ratio-to-estimated revenue growth (P/S/G) and TTM profitability metrics of several publicly traded companies in the crypto and financial space. Company Name Three-Year Forward P/S ratio Three-Year Forward estimated revenue growth Three-year Forward P/S/G TTM free cash flow ("FCF") margin TTM Gross Margin TTM Operating Margin TTM ROIC Galaxy Digital 0.07 29.19% 0.002 0.24% 3.14% 1.79% -0.6% IREN, Ltd. 3.45 46.00% 0.075 -119.20% 30.96% -0.40% 1.6% Coinbase Global 7.81 8.20% 0.952 34.55% 86.71% 44.94% 12.2% Cboe Global Markets 10.56 3.13% 3.37 24.72% 46.76% 29.97% 13.1% Futu Holdings 6.99 11.76% 0.594 9.37% 94.46% 68.38% 29.1% Robinhood Markets 19.19 12.57% 1.526 -103.05 89.78% 47.85% 11.5% Circle Internet Group ( CRCL ) 4.09 38.16% 0.107 14.00% 5.14% -3.36% -0.3% Mara Holdings ( MARA ) 3.58 7.60% 0.471 -75.98% -26.64% -67.88 8.6% Riot Platforms ( RIOT ) 6.70 16.23% 0.412 -60.45% -11.68% -58.50% 10.4% CleanSpark ( CLSK ) 2.35 66.61% 0.035 -79.03% -3.85% -13.97% -21.4% Source: Seeking Alpha for forward P/S revenue and revenue growth metrics. YCharts for TTM gross margin, TTM Operating Margin, and TTM FCF. A third-party website for TTM ROIC. Generally, the market considers the stock with the lowest P/S/G as undervalued compared to those with higher P/S/G ratios. According to that convention, some investors may consider Galaxy's three-year forward P/S/G ratio of 0.002 as severely undervalued. However, some investors may consider Galaxy's revenue to be of much lower quality than most of the companies in this comparison, given that much of it is non-recurring and volatile. Additionally, the company has the lowest gross margins in the comparison at 3.14%. Therefore, it is likely that many traditional financial investors consider the P/S/G discount well-deserved and believe the stock is trading at fair value. Some may even think the market overvalues it. The market may continue to value it at a discount until the company develops additional recurring revenue streams and higher-margin revenue streams. Galaxy Digital has a TTM price-to-earnings (P/E) of 40.86, well above the Financials sector median of 13.08. Therefore, some may consider it overvalued. The following table shows that analysts expect the company's earnings-per-share ("EPS") to be inconsistent and its EPS growth to be negative over the next several years. Seeking Alpha Normally, I would calculate a forward P/E-to-growth ("PEG") ratio here. However, the company doesn't produce a steady positive EPS growth to make the calculation make sense. Until the company achieves higher margins and steady revenue, its EPS growth may be inconsistent. I also won't perform a price-to-free cash flow (P/FCF) analysis on Galaxy Digital because its FCF is volatile and often negative, which produces unreliable results. Risks The U.S. Securities and Exchange Commission (SEC) has not yet ruled definitively on whether digital assets are securities, creating uncertainty for its business model—its most significant risk. At any time, the SEC may declare that one of the company's critical assets (or the activities it engages in, such as staking) is an unregistered security. Suppose the regulator rules that a specific digital asset is a security. In that case, the government may impose massive fines, file lawsuits, force it to pay expensive licenses for its activities, or force Galaxy to shut down parts of its business for operating an unregistered exchange or brokerage. So far, the SEC has sent mixed signals about which way it is leaning. Even with the current presidential administration's supposedly positive stance on digital assets, a change in the White House several years down the road could alter the SEC's view of digital assets. The market may lower the stock's valuation due to this risk. The company's attempt to transform a Bitcoin mining facility into an AI infrastructure facility at the Helios campus in Texas could expose it to execution risk. Delays in getting the facility up and running as an AI infrastructure facility due to construction delays or cost overruns could delay the promised revenue and cash generation. The market would likely respond by selling the stock off. Some investors may be uncomfortable with the composition of the company's equity capital and net digital assets. The company allocated approximately 40% of its $3.2 billion in equity capital to Digital Assets. Galaxy Digital Third Quarter 2025 Earnings Press Release. Additionally, its Treasury & Corporate segment (representing 35% of equity) is composed mainly of cryptocurrencies and related investments, which include Bitcoin ($546 million), Ether ($258 million), and Solana ($291 million). The Treasury & Corporate segment also includes Venture and Fund Investments, which are illiquid assets that are difficult to sell quickly or value precisely because their valuations rely on management's estimates rather than open-market prices, introducing valuation uncertainty and potential for future write-downs. Venture and Fund Investments are worth approximately $646 million. As a result of exposure to cryptocurrency and illiquid investments, its equity value can sink like a rock if cryptocurrency prices fall for an extended period. One of the prime reasons the market values the stock so low is the potential volatility in its equity value. Among the reasons the company is moving into the data center business is that it represents 25% of equity capital, helping derisk some of its cryptocurrency exposure. The company's move into asset management also derisks its balance sheet and stabilizes its earnings, as it is a high-margin, recurring-fee business that grows with client assets under management and assets under Stake, rather than increasing Galaxy's cryptocurrency trading business. Since cryptocurrency trading involves expanding the digital asset reserves on the balance sheet to facilitate market making and trading, an increase in trading on the platform can make earnings more volatile, worsen the balance sheet, and increase the stock's potential volatility. Galaxy Digital's cash and short-term investments are $6.814 billion, and long-term debt is $4.215 billion. Data by YCharts Galaxy's Debt-to-Equity (D/E) ratio can be very confusing. If you Google the number, different websites will give you a range of 2.63 to 0.65. If you make a mistake and calculate the D/E using Seeking Alpha figures of total debt of $4.532 billion divided by total equity of $3.172 billion, it equals 1.42. However, the best way to calculate the D/E is to use total liabilities, which were $8.35 billion in the third quarter. If you divide $8.35 billion by $3.172 billion, it equals a D/E of 2.63, which is what you see on many websites. A D/E of 2.63 means the company finances its operations with debt more than equity, which some investors may find too risky. Although a D/E of 2.63 is mathematically correct, it may be inappropriate for Galaxy's digital asset business model. The way to calculate the D/E for a Galaxy's business model differs from that for a traditional company. Galaxy Digital Third Quarter 2025 Earnings Press Release. Galaxy's balance sheet contains several crypto-specific or financial service-specific liabilities that can distort the D/E. The two largest balance sheet items are Digital Assets Borrowed and Collateral Payable. The volume of client trading on the platform can create these crypto-specific liabilities, which differ from traditional corporate debt, as they inflate the debt figure without representing actual financial risk. When eliminating Digital Assets Borrowed and Collateral Payable from total debt; $8.35 billion (total liabilities) - $3.05 billion (digital assets borrowed) - $2.55 billion (collateral payable)/$3.172 billion (Total equity) = a D/E of 0.86, which indicates that Galaxy actually conservatively uses equity more than debt to finance its operations. The difference in these calculations could determine whether an investor considers the stock too risky or conservative. I calculated everything out to show that investors should avoid relying solely on numbers from websites. All websites can get some numbers wrong. I have even caught YCharts and Seeking Alpha figures being mistaken before for several reasons, including the fact that standard calculations may not be appropriate for all companies. Galaxy's current ratio is 1.34, which is acceptable for its business model, meaning it has sufficient assets to cover its short-term liabilities. Still, some investors may be scared off by its balance sheet until the company's diversification efforts (AI infrastructure cash flows, digital asset fee businesses) take effect and reduce the negative impact of cryptocurrency on it. Galaxy Digital is a buy for aggressive growth investors Some of the company's risks make this investment unsuitable for conservative or value investors. However, although this company poses a high risk in both its crypto financial services and AI infrastructure businesses, some risk-taking, aggressive growth investors have an affinity for the company's high potential upside. Mordor Intelligence forecasts the asset tokenization market to grow from $2.08 trillion in 2025 to $13.55 trillion in 2030. Asset Tokenization has yet to really take off in the U.S. because government regulators have not yet fully established regulations for the market. However, those rules are likely to be in Galaxy's favor with a pro-crypto presidential administration behind them on crypto and Tokenization. Galaxy Digital has yet to disclose specific revenue figures for its tokenization activities, but tokenization revenue likely accounts for only a small fraction of the total addressable market. If the company positions itself as a top player in Tokenization, its digital assets business may have just as much, if not more, upside than its much-hyped AI infrastructure opportunity, which the company expects to bring in $1 billion in high-margin annual revenue over the next 15 years. If it builds out both segments, the stock has significant upside potential and may be worth the risk for aggressive growth investors. If you are a risk-tolerant investor looking for a potentially high-upside stock, this might be your cup of tea. I recommend a buy for aggressive growth investors.