AI's Accidental Kingpin

Long dismissed as a hedge fund trader who lucked into bitcoin, billionaire MICHAEL NOVOGRATZ is now one of the most important players in AI infrastructure.

- Nina Bambysheva

The Trend Is His Friend A trader who has won and lost billions, Galaxy founder Michael Novogratz recently made his greatest trade: pivoting from cheap, volatile crypto infrastructure assets to the world's hottest growth business.

Chaos creates opportunity. Few recognize it in the moment; even fewer are willing to write a large check before the dust settles. Former Goldman Sachs trader Michael Novogratz had no trouble writing the check. What he didn't yet grasp in December 2022 was how consequential his contrarian, defensive bet would be.

That month, with crypto reeling from the collapse of Sam Bankman-Fried's FTX empire and the bankruptcies rippling outward, Novogratz's Galaxy committed $65 million to acquire a 160-acre bitcoin mining operation in Dickens County, a sparsely populated expanse of Texas about 330 miles northwest of Austin.

“It most likely will be my best investment by a long shot,” says Novogratz, 61.

On its face, the deal looked almost willfully mistimed: a major investment in mining infrastructure at precisely the moment the industry was reckoning with its excesses—a toxic stew of bad leverage, bad counterparties and unchallenged assumptions. More than $1.5 trillion worth of digital assets had evaporated that year; bitcoin and ether were both down more than 60%.

Earlier in 2022, as signs of stress began appearing across the industry, Novogratz's firm grew uneasy about the amount of capital it had tied up in crypto-mining chips housed in third-party data centers. “We got concerned that we had some real sizable capital invested in assets that were sitting in control of people whose credit quality was declining,” recalls Christopher Ferraro, Galaxy’s president and chief investment officer.