Northern Data Group — Completion of major milestone

Northern Data Group (XETRA: NB2)

Last close As at 12/06/2024

EUR22.65

−0.25 (−1.09%)

Market capitalisation

EUR1,212m

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Research: TMT

Northern Data Group — Completion of major milestone

Northern Data Group has received regulatory approval for its acquisition of Damoon, delivering on a key milestone. As part of the transaction, Northern Data has received more than 10,000 NVIDIA H100 Server Module Tensor Core graphic processing units (GPUs) bringing its total inventory to over 18,000 H100 GPUs and cementing its position as Europe’s largest artificial intelligence (AI) hardware cluster. This expansion bolsters the generative AI capabilities of its Taiga Cloud division, which aims to democratise access to AI compute power, driving innovation among startups, researchers and medium-sized enterprises. Amidst Europe’s increasingly stringent environmental and data protection regulations, Northern Data looks well placed to capture market share.

Max Hayes

Written by

Max Hayes

Associate Analyst

TMT

Northern Data Group

Completion of major milestone

Tech hardware and equipment

Spotlight - Flash

9 January 2024

Price

€25

Market cap

€1.2bn

Share price graph

Share details

Code

NB2

Listing

Frankfurt

Shares in issue

48.7m

Business description

Listed in Germany, Northern Data operates highly energy-efficient data centres across Europe and the US. It is pivoting from a pure-play cryptocurrency miner into a diversified provider of high-performance computing solutions. Its updated strategy was marked with the launch of three new divisions: Peak Mining, Ardent Data Centers and Taiga Cloud, with each targeting a different area of the value chain.

Bull

Data centres with strong efficiency, power and sustainability credentials, which are well equipped to face tightening regulation within the European landscape.

Large inventory of the latest NVIDIA GPUs, which are in short supply, positioning the group to take advantage of the fast-evolving AI space.

Strong track record in bitcoin mining provides consistency alongside new strategy.

Bear

Unproven in cloud computing space, creating execution risk without performance track record.

Bitcoin price is highly volatile, creating cash flow lumpiness in the crypto mining division.

Controversy, particularly around disclosures and reporting, creates uncertainty.

Analysts

Max Hayes

+44 (0)20 3077 5721

Katherine Thompson

+44 (0)20 3077 5730

Northern Data Group is a research client of Edison Investment Research Limited

Northern Data Group has received regulatory approval for its acquisition of Damoon, delivering on a key milestone. As part of the transaction, Northern Data has received more than 10,000 NVIDIA H100 Server Module Tensor Core graphic processing units (GPUs) bringing its total inventory to over 18,000 H100 GPUs and cementing its position as Europe’s largest artificial intelligence (AI) hardware cluster. This expansion bolsters the generative AI capabilities of its Taiga Cloud division, which aims to democratise access to AI compute power, driving innovation among startups, researchers and medium-sized enterprises. Amidst Europe's increasingly stringent environmental and data protection regulations, Northern Data looks well placed to capture market share.

As detailed in our initiation, Tether originally acquired Damoon and then supplied Northern Data with the H100 GPUs owned by Damoon in return for a 20% stake in Northern Data (deal value €400m), making Tether, a leading blockchain player, a cornerstone investor. We believe the investment further validates Northern Data’s generative AI market proposition.

Deployment of the H100s started in December 2023 and is set to finish by mid-2024, enabling Taiga Cloud to scale operations to capture underserved demand for AI compute power in Europe. At the time of our initiation, Taiga had four immediate contracts in its pipeline to deploy more than 6,000 H100 GPUs, potentially equating to over €105m in annual revenue assuming €2 per hour and full utilisation.

On 4 December, Northern Data announced a €110m investment strategy for Ardent Data Centers to expand its portfolio of state-of-the-art, liquid-cooled data centres. This will ensure Taiga has the infrastructure to deploy the expected GPUs on schedule, a key milestone for the group to reach its FY24 guidance.

Reflecting confidence in the company’s direction, Aroosh Thillainathan, founder and CEO, announced a substantial personal investment in Northern Data of up to €30m from January to May 2024 through a preset purchase plan agreement. His current holding is 2.8m shares worth c €69m, representing a c 6% stake. At the current share price, this could increase to over 8% following the purchase plan.

Northern Data expects to publish audited FY22 results in Q124, followed by FY23 results by end-H124. Management has stated that the evolution of the business from a cryptocurrency miner into a diversified provider of high performance computing infrastructure solutions over the last year has created challenges in publishing audited figures. Now with its business model established, the company is striving for transparency for FY23 and beyond, where we believe audited reporting could boost investor confidence. We plan to initiate forecasts following the publication of the group’s FY22 results.

General disclaimer and copyright

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

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Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Northern Data Group and prepared and issued by Edison, in consideration of a fee payable by Northern Data Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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