Digi Power X: Growth Story Priced On Trust, Not Fundamentals

Summary Digi Power X pursues a hybrid model in data centers, energy integration, and crypto mining, aiming to capitalize on AI and cloud demand. DGXX's growth relies on capital-intensive projects and frequent share issuance, creating significant dilution risk for shareholders despite being ￰0￱ company shows early progress with initiatives like Nvidia Blackwell orders for its NeoCloud AI platform, but scale and competition remain major ￰1￱ high dilution risk, volatile crypto exposure, and unproven financials, I rate DGXX as a hold until tangible results ￰2￱ Power X ( DGXX ) is positioning itself as hybrid company, working in energy, technology and cryptocurrency ￰3￱ company's model is based on three directions: modular Tier III certified ARMS 200 platform development, energy portfolio (~100 MW across three sites, with expansion to >200MW) and crypto mining ￰4￱ first look, this is a good diversification strategy, but then it raises the question if these segments create synergy and aren’t they chosen only as popular ￰5￱ DGXX narrative is growing AI and Cloud demand, which will need more data ￰6￱ are also talking about potential of their own energy supply to centers, what in theory should lower costs and dependence on others, but these plans require a lot of ￰7￱ third direction – cryptocurrency mining infrastructure can generate additional revenues in cycle tops, but at the same time it is increasing risk due to crypto ￰8￱ though currently DGXX declaring, that they don’t have long-term debt, but they are financing with share issuance, and this is also increasing dilution risk.

Currently, they live from “future story” not from stable business, although we see first steps towards stability as in H1 2025 colocation is already generating revenues and AI DC delivery is planned on Q4 ￰9￱ and Cloud Recently the company has been trying to show that their talks about AI are not just empty ￰10￱ of the moves is an order from Super Micro Computer ( SMCI ) for Nvidia Blackwell systems, which will be used on their AI platform ￰11￱ immediately caught markets attention and shares even though for short time, ￰12￱ was a good signal that the company is starting to move from theories to real actions. However, we should understand that order of few systems is not the same as becoming AI or Cloud market ￰13￱ data centers operators are managing hundreds or thousands of server servers, while DGXX is just ￰14￱ though the order was a positive step and shows that the company has ambitions, this project does not prove that they are able to compete with bigger market ￰15￱ Overview January2025 Tier III One of the main plans – modular Tier III colocation data center ￰16￱ decision seems logical, because worldwide AI and Cloud services demand is increasingly ￰17￱ growing demand for calculation power and storage infrastructure, many companies choose to rent a place in certified data centers without needing to build their ￰18￱ makes other companies save on costs, and at the same time gives business for players like ￰19￱ III standard means that data centers will be very reliable, even with technical difficulties they will be able to continue their ￰20￱ this is very important for DGXX clients, because businesses want reliability and stability but are not ready to pay for Tier ￰21￱ position is very attractive, DGXX is aiming for growing mid class segment, and I see a lot of potential there.

Currently, the market is very ￰22￱ example, Equinix or Digital Realty are already in the market, and they have scale advantages. Plus, data center development is a capital heavy venture: infrastructure, licensing, maintenance and so ￰23￱ currently, DGXX is financing this through share ￰24￱ Overview January2025 Energy Integration Narrative The company is not only creating data centers, but they are building their own energy ￰25￱ first impression, to me this was a good idea, but then I thought, doesn’t this make them jack of all trades? Yes, having their own energy solution could decrease costs and increase margins, additionally that would cut dependency on external providers and could help with energy spot price volatility, which in recent years became common problem in Europe and US.

Again, these types of projects require a lot of ￰26￱ projects cost a lot of money, and their ROI is very long, and for micro-caps like DGXX that could become a burden. Again, I believe that this type of project is good but also increases risk of ￰27￱ Overview January2025 Crypto The fourth DGXX activities direction is crypto mining ￰28￱ management is trying to show that they can make additional revenues from crypto ￰29￱ this is where I see a lot of ￰30￱ looks good on paper as a diversifying tool – when market experiences a bull run, mining activities could give revenue some boos and increase ￰31￱ is an option that gives DGXX additional growth potential if Bitcoin or other popular cryptocurrencies start to ￰32￱ crypto has negative aspects as ￰33￱ are highly volatile, and mining infrastructure is capital heavy, rapidly going out of date ￰34￱ today could be effective, and after few years it could generate losses due to competition or technological ￰35￱ risky part with crypto currencies is ￰36￱ I mentioned, the company looks like jack of all trades, and having exposure as investor to crypto, when you wanted AI and data centers is quite ￰37￱ Alpha Financial Health DGXX is saying that they do not have a debt (long-term) and it gives them ￰38￱ further growth and capital-intensive projects are making them regularly go to investors and do a share ￰39￱ example, in July ￰40￱ attracted $15 million through direct offering, selling 4,807, 693 shares for $3.12 ￰41￱ this issuance DGXX says they have more than $30 million cash and equivalents and still don’t have ￰42￱ Q2 2025 they additionally attracted $6.6 million through private issuance and $4.5 million through ￰43￱ more through ATM program which already has issued 806291 shares with average price of $2.13.

We can take a look at smaller example, agreement with NANO Nuclear Energy, they will issue 109677 (subordinated voting shares) as compensation for $250000 ￰44￱ though this emission is smaller, still it adds up to dilution and shows that they are not afraid to dilute existing ￰45￱ does it say about them? The company is announcing debt free, but financing operations through investors, which indeed lowers financial risk due to interest rates for the company, but the risk for investors ￰46￱ Alpha Valuation To evaluate DGXX is very hard task, because they are working in three different segments – data centers, energy projects and crypto ￰47￱ of the time, companies like these are evaluated by their business stability, cash flow prognosis and peer comparison, but sadly, I can valuate only looking at peer comparison and speculate on potential fair ￰48￱ we look at the peer comparison table, we can see that based on multiples the market is fragmented, and investors are mostly investing into “future story” Seeking Alpha DGXX currently is traded at P/S (TTM) 2.51 and EV/Sales 3.33, P/B 3.59, we can compare it to: IDN has P/S ~4.72 and EV/Sales ~4.48 – so DGXX looking cheaper based on ￰49￱ with EV/Sales ~2.01 or P/S ~0.34 valued lower, because market has less trust in it’s growth ￰50￱ stands near ZENV – EV/Sales ~2.51, P/S ~0.72.

We can see that DGXX is somewhere in the middle, it’s more expensive than burnt names (ZENV, NVNI), but cheaper than those that already showed results ((IDN)). This company is in many segments so, as I said, it’s hard to tie it to one sector ￰51￱ investors started valuation DGXX as IDN, share price from current $2.62 could go up to around $4.90-5.00 and that would be ~90% ￰52￱ if they could create a stronger data center proof of concept, the market could give it EV/Sales of around 6x, then fair price would be $6.00-6.50 (130-150% upside potential). P/S Implied Price Upside/Downside% Bear (ZENV/NVNI levels) 0.7 0.73 -72.1 Base (Current DGXX) 2.51 2.62 0 Upside (IDN levels) 4.7 4.91 87.3 Bull (Higher premium) 6 6.26 139 Yet, the numbers of upside always look ￰53￱ is big as ￰54￱ we compare it to ZENV or NVNI, which are currently traded at 0.3-0.7 P/S, the fair value could dip to $0.8-1.20, and that would be -55-70% ￰55￱ current valuation is based on trust, not ￰56￱ currently it is expensive, I would be willing to buy when they start showing financial results, not only ￰57￱ In short, the risks I see are: Regular share issuance and big dilution ￰58￱ capital needs (Tier III centers, energy, crypto) Crypto segment is very volatile and could wash the capital away Big competition from other market giants Catalysts: First Tier III colocation center ￰59￱ AI/Could orders Energetic integration which would lower costs.

Hopefully, crypto rally which would increase revenue in short ￰60￱ DGXX is typical "future story" stock, they have three different directions that I feel could stretch their ￰61￱ recent months, they showed us some good moves, like order of Nvidia Blackwell for AI platform "NeoCloud", but current scale is not ￰62￱ market is growing, but it is capital heavy and in theory those energy projects we talked could help with the ￰63￱ part of the business is risky and makes me look at the company sceptically, maybe it's my bias against ￰64￱ is mostly done by share issuance, which dilutes shareholders and that is risky ￰65￱ to risk to reward ratio, I am rating this stock as hold.