Jul 1, 2024

Northern Data Weighs AI Unit US IPO at Up to $16 Billion Value

David Pan and Eyk Henning, Bloomberg News

Fiber optic cables, center, and copper Ethernet cables feed into switches inside a communications room at an office in London, U.K., on Monday, May 21, 2018. The Department of Culture, Media and Sport will work with the Home Office to publish a white paper later this year setting out legislation, according to a statement, which will also seek to force tech giants to reveal how they target abusive and illegal online material posted by users. Photographer: Jason Alden/Bloomberg , Photographer: Jason Alden/Bloomberg

(Bloomberg) -- Northern Data AG is speaking with potential advisers about a US initial public offering of its combined artificial intelligence cloud computing and data center businesses, according to people familiar with the matter.

Banks asked to pitch for a role have suggested valuations for the business from about $10 billion to $16 billion, the people said. Under the current plan, Northern Data would list an entity comprising its cloud computing activities, dubbed Taiga, and its data centers, called Ardent, on the Nasdaq as early as in the first half of next year, they said.

Northern Data shares jumped as much as 27% on Tuesday on the news. Even so, the proposed deal valuation is up to 10 times the entire company’s current market capitalization — reflecting how businesses are moving to take advantage of the frenzy around AI stocks.

The valuation range floated by banks takes into account previous and future purchases of AI chips by Northern Data, two of the people said. Potential advisers also based the valuation range on that of CoreWeave, the cloud-computing startup Bloomberg News reported in early May was raising money at a roughly $19 billion value, according to these people.

Northern Data already owns both data centers and advanced AI chips, helping boost the argument for a lofty valuation, the people said.

The company has asked several potential advisers to pitch for a role and could mandate lead banks within the coming months, the people said. Deliberations are ongoing, details may change and the company could decide not to go ahead with the strategic options under consideration, they said. A representative for Northern Data declined to comment.

Northern Data could also sell a minority stake in the unit to investors prior to such a listing, the people said. The stock increase was the biggest in more than a year. The company, based Germany’s financial capital of Frankfurt, went public in 2018, a statement at the time shows.

The move comes as cloud computing firms in the AI race are attracting a flood of investment. CoreWeave was finalizing $8.6 billion in funding including a $1.1 billion preferred equity investment that would give the startup a $19.1 billion valuation, according to the Bloomberg report.

Thinner Profit Margins

Northern Data was considering an IPO for the cloud unit alone, and separately, a US listing for its Bitcoin mining operations, it told analysts and investors in November.

Peak Mining, the company’s US Bitcoin mining unit, has almost 700 megawatts of data centers in active construction or development, according to a statement in May. That would make it one of the largest crypto miners in the US.

Thinning profit margins in crypto mining have prompted miners to convert their energy-intensive data centers into digital infrastructure that can power generative AI applications. Access to large amounts of power and experience in running graphic processing unit-based operations can give miners an edge over some of the traditional data center operators.

Would-be public companies in the crypto industry such as stablecoin issuer Circle and digital-asset exchange Kraken have faced headwinds. The US Securities and Exchange Commission has butted heads with Kraken for allegedly running an unlicensed exchange, which the company disputes, while the regulatory status of stablecoins remains uncertain.

In 2022, Northern Data had been one of Ether’s top miners and had devoted about 70% of its operations to it. Following a software update in the Ethereum blockchain, the company pivoted away from mining the token, instead developing other businesses such as high-performance computing.

Northern Data in November secured a €575 million debt-financing facility from stablecoin firm Tether Group, and in January completed the acquisition of a vehicle from Tether valued at €400 million, making Tether the cornerstone investor in Northern Data, according to a statement.

Th company is using the funds for purchases of the most sought-after Nvidia Corp. chips. About 20,000 H100s, one of the semiconductor firm’s most advanced AI chips, will be deployed by the end of the summer.

(Updates the share price increase in the third paragraph.)