Current Affairs Security

Galaxy's $3.5 Billion Bet: Can They Actually Pull Off the CoreWeave Play?

2026-07-26

Galaxy Digital just committed to servicing nearly $350 million in annual interest. That's the headline buried in a $3.507 billion senior secured debt offering that screams "execution risk" from every angle.

The deal itself is clean enough on paper. Galaxy Helios Data Centers II issued 9.875% notes due 2031 in July, ostensibly to fund an AI infrastructure expansion for CoreWeave across a Texas campus. Four hundred megawatts of utility capacity. Two hundred and sixty megawatts of critical IT load. The kind of project you build when you believe demand for GPU power isn't about to crater tomorrow.

But here's where it gets uncomfortable. That $346.3 million annual interest burden doesn't start until 2027. Interest payments hit February and August each year. Principal amortization—4% annually—waits until roughly 10 months after construction completion. Creditors hold first-priority liens on nearly everything: the project assets, the parent company's stake in the issuer. They don't reach Galaxy Digital's balance sheet generally, but they do cover the bits that matter.

Galaxy had reasons to feel confident. Phase I delivered on time and on budget. They shipped 133 megawatts of critical IT load to CoreWeave in Q2 2026. Clean execution. No drama.

Phase II is where confidence meets reality. The site's in greenfield stage right now—civil and structural work ongoing. Data hall deliveries are supposed to start in H1 2027. Phase II is bigger in scope. The timeline is tighter. And there's no room for mishaps.

Across all three phases, CoreWeave has locked in 526 megawatts of critical IT load. That's the full 800 megawatts of gross power currently approved. The lease runs 15 years with two five-year extension options, and the company reckons it'll pull down more than $1 billion in average annual revenue over the lease term. Neat math. Assumes execution stays flawless.

This debt issuance isn't unique to Galaxy. They're part of a wave. AI infrastructure debt has migrated into the junk-bond space. About $28 billion has already been raised this way. Applied Digital raised $1.59 billion alone. When companies start funding infrastructure via high-yield debt, you know the sector's transitioning from hype to real capital allocation. Doesn't mean it'll work.

The structure itself reveals both caution and vulnerability. Interest costs are front-loaded. Revenue generation is deferred until the asset actually works. If Phase II slips six months—if civil work hits delays, if supply-chain issues bite again, if labor constraints tighten—Galaxy still owes $346 million annually while producing less revenue. The math breaks.

Galaxy's bet here is clean: deliver 260 additional megawatts of critical IT capacity by mid-2027, service that debt burden, and keep CoreWeave happy on a 15-year lease. Phase I's success is genuinely encouraging. But Phase II's scope is significantly larger, and the compressed timeline between closing and deliveries means there's almost no slack in the rope.

The company's betting its balance sheet—and shareholder returns—on near-flawless execution. That's not inherently reckless. It's just expensive if anything goes wrong.

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