Issue #20

From Data Centers to Data Refinery: 2 AI Winners to Watch

The AI infrastructure boom is creating two very different kinds of opportunities—one in the physical backbone that powers AI computing, the other in the software layer that makes sense of massive data.

Digi Power X (NASDAQ: DGXX): A small-cap energy player reinventing itself as an AI data center operator, with Tier III-certified facilities, NVIDIA partnerships, and a debt-free balance sheet driving its pivot away from crypto mining.

Veritone (NASDAQ: VERI): An enterprise AI software company transforming unstructured data into AI-ready insights, with explosive growth in its government contracts and a surging pipeline for its new Data Refinery offering.

Both stocks trade at low single digits today—but with strong analyst “Buy” ratings and double- to triple-digit upside potential, they represent two distinct but compelling ways to gain exposure to the AI megatrend.

Digi Power X (NASDAQ:DGXX)

Digi Power X (NASDAQ: DGXX) is an innovative energy infrastructure company primarily focused on developing cutting-edge data centers to power the expansion of energy and technology, particularly by pivoting aggressively into the AI infrastructure market. Historically, the company has operated primarily in the cryptocurrency mining and colocation space, but its new strategy positions it directly in the path of the massive demand for AI-ready computing power.

Business Model and Revenue Streams

Digi Power X's business model is centered on owning and operating energy-efficient data centers and power infrastructure, which it monetizes through several key streams:

• AI Colocation Services: This is the company's new and rapidly growing core focus. It involves providing ready-to-use, high-power density data center space and connectivity specifically designed for the needs of AI and enterprise customers. The recent certification of its modular ARMS 200 AI-Ready Modular Solution for Tier III reliability is a major step in securing enterprise-grade clients.
• Cryptocurrency Mining: Historically a primary revenue stream, this involves using their owned power and infrastructure to mine Bitcoin and, to a lesser extent, Ethereum. While generating revenue and allowing the company to build a digital asset reserve, the company is actively transitioning resources away from this and toward AI infrastructure, as seen with the cessation of mining at its Alabama site.
• Energy Sales and Electricity Colocation: The company generates revenue by participating in load curtailment programs and selling excess power back to the grid, particularly during periods of high capacity pricing. This monetizes their existing power assets and reduces the overall cost of their core operations.

The company's strategy relies on vertical integration and low-cost power (achieving an industry-competitive average supply cost of approximately US$0.038/kWh at some sites) to build a resilient backbone for data-intensive applications.

Macroeconomic Impact on DGXX

The current macroeconomic environment presents a mixed impact on DGXX, with its strategic pivot being a key factor:

• Positive Tailwinds: The enormous global investment and demand for AI infrastructure acts as a powerful tailwind, driving strong demand for high-density colocation services and power capacity. This overshadows the company's legacy business.
• Interest Rates and Inflation: Like all infrastructure firms, DGXX is exposed to higher interest rates, which increase the cost of capital for its planned expansion from 100 MW to over 200 MW. Inflation can also raise the cost of construction materials and equipment. The company counters this by strengthening its balance sheet and utilizing capital from financing/warrant exercises.
• Cryptocurrency Markets: As a former crypto-focused company, its balance sheet remains affected by the volatility of its Bitcoin and Ethereum holdings (totaling approximately $29 million in cash and crypto as of late September 2025). The ability to generate new crypto through mining, however, provides a non-dilutive source of capital for infrastructure investment.

Recent Performance and Corporate Developments 📈

Digi Power X has undergone a transformational period characterized by significant financial improvements, a strategic shift toward AI, and key technical milestones.

Q2 2025 Financial Highlights: 💰

The company reported solid mid-year financial results for the quarter ending June 30, 2025:

• Revenue Beat: DGXX reported revenue of $8.11 million, which surpassed the consensus estimate of $7.8 million (though missed an earlier estimate of $10.66M). This represented a year-over-year revenue decrease, primarily due to the strategic reduction in lower-margin crypto-mining revenue in favor of high-growth services.
• EPS Beat: The company reported a loss of $-0.28 per share, significantly beating the consensus estimate of a loss of $-0.35. The company has surpassed consensus EPS estimates in three of the last four quarters.
• Positive Adjusted EBITDA: A major milestone was the achievement of Positive Adjusted EBITDA in Q2 2025, signaling improved operational efficiency and a stronger foundation for sustained profitability.
• Financial Strength: The company reported significant balance sheet improvements, including the removal of the 'going concern' risk and holding its strongest liquidity position in company history, with over $30 million in cash, Bitcoin, Ethereum, and cash equivalents post-quarter.

Strategic Initiatives and Corporate Developments: 🤝

• AI Infrastructure Pivot: The company has accelerated its pivot to AI infrastructure, which includes the construction of Tier 3-certified AI-ready facilities at its Alabama site.
• Tier III Certification: In September 2025, DGXX achieved Tier III certification for its ARMS 200 AI-Ready Modular Solution, which certifies 99.982% availability and enterprise-grade reliability, making it highly competitive for demanding AI workloads.
• Strategic Partnerships: The company has strengthened its partnership with Supermicro (SMCI) for AI-optimized rack-scale systems and is on track to have its first NVIDIA B200 GPU cluster fully operational by Q1 2026.
• Capacity Expansion: The company plans to expand its power capacity from a current footprint of 100 MW to over 200 MW to meet AI demand.
• Capital Raises: The company executed a $15 million Registered Direct Offering of common stock in July 2025 and utilized warrant exercises, significantly strengthening its liquidity position and debt-free status.

Path to Profitability and Fair Value 🎯

DGXX's path to consistent profitability hinges entirely on its successful pivot to the high-margin AI colocation business. The Q2 2025 achievement of positive Adjusted EBITDA and the aggressive rollout of its certified ARMS 200 platform are crucial steps in this direction. Monetizing its low-cost power infrastructure through colocation and energy sales is the long-term sustainable model.

Fair Value Assessment

Valuing DGXX is challenging given its ongoing transition from a crypto miner to an AI data center operator. Traditional P/E metrics are not applicable due to its current negative earnings.

• Growth/Momentum: The company's stock has strong Momentum (Zacks Momentum Score A) and is positioned for a strong revenue outlook, with a lone analyst anticipating a 27% climb in revenue during the coming year.
• Valuation Metrics: Based on its current metrics, the stock is viewed as highly expensive by some value rating systems (e.g., AAII Value Grade F). However, its value is tied to its future potential as a pure-play AI infrastructure provider, which commands a premium. The market capitalization is relatively small (around $100-150 million), suggesting significant room for growth if the AI strategy succeeds. The stock’s price in the low $2 range suggests high volatility and a speculative nature, typical of small-cap growth stocks in a rapid transition.

Analyst Estimates and Ratings

The analyst community is notably bullish on DGXX, based on the growth potential of its new AI focus:

• Consensus Rating: Based on limited analyst coverage (2 analysts), the consensus rating is a "Strong Buy", with 100% of analysts recommending a Strong Buy. This aligns with the prompt's condition that these stocks get most analyst buy ratings in the last 30 days.
• Price Target: The Wall Street average 12-month price target is approximately $3.00. This suggests a modest potential upside from the current share price, but with the caveat that the high-conviction "Strong Buy" rating suggests belief in a potential breakthrough that could push the stock significantly higher than the initial conservative target.

Investor-Focused Takeaway: Is DGXX Right for Your Portfolio?

Digi Power X offers a speculative, high-growth investment thesis on the AI infrastructure boom. The company's successful pivot, backed by the Tier III certification of its modular AI solution and a strong, debt-free balance sheet, provides the operational foundation.

What to Watch in the Near Term: 📈

• AI Contract Pipeline: Monitor the speed and size of new AI colocation contracts signed in Q4 2025.
• Infrastructure Expansion: Watch for updates on the 200+ MW capacity expansion and the first NVIDIA B200 GPU cluster deployment in Q1 2026.
• Sustained Profitability: Track quarterly reports for sustained positive Adjusted EBITDA and a clear path to net income profitability.

Recommendation:

DGXX is a "Strong Buy" for investors with a high-risk tolerance looking for an early-stage play in the AI data center space. Its small-cap status offers substantial potential upside if the AI strategy is successfully executed, but it comes with higher volatility than established players. The strong analyst endorsement is a vote of confidence in the management's new direction.

Veritone (NASDAQ:VERI)

Veritone is an enterprise artificial intelligence (AI) company that has built its business around its proprietary aiWARE platform, which it positions as an operating system (OS) for AI. The platform is designed to process and analyze massive amounts of unstructured data—such as audio, video, and text—to extract actionable insights and automate workflows for clients across the media, public sector, and commercial enterprise verticals. Veritone is transforming itself into a pure-play AI software and data company, shedding legacy, lower-margin businesses.

Business Model and Revenue Streams

Veritone's model is centered on its cloud-based aiWARE platform, which orchestrates a large ecosystem of hundreds of AI models (both proprietary and third-party) to solve complex business problems.

Revenue comes primarily from two core segments, with a clear strategic shift toward the first:

• Software Products & Services (Core AI): This is the high-margin, high-growth engine of the company. It includes:
  • Subscription Fees (SaaS): Recurring revenue from access to the aiWARE platform and its applications (e.g., content management, compliance, and investigative tools).
  • Consumption/Usage Fees: Revenue based on the volume of data processed or the number of AI model transactions executed by the customer.
  • Veritone Data Refinery (VDR): A new, high-growth offering that helps enterprises and hyperscalers transform their unstructured data into high-quality, AI-ready training data—a critical and high-value step in the AI development lifecycle.
• Managed Services (Legacy/Support): This includes technology-driven services, primarily in the advertising and media space (like Veritone One and VeriAds), as well as professional services for implementation and integration. The company is actively focusing on transitioning this revenue mix toward the higher-margin software business.

The focus on Annual Recurring Revenue (ARR) is key, with a significant majority (over 80% as of Q1 2025) of its ARR now coming from subscription-based customers, indicating a shift to a more predictable, high-quality revenue model.

Macroeconomic Impact on VERI

Veritone is a growth-stage software company, making it highly sensitive to macro conditions:

• Interest Rates and Capital: Like many unprofitable growth companies, higher interest rates raise the cost of capital and increase investor scrutiny on cash burn and the path to profitability. This has forced the company to execute cost-cutting measures and conduct dilutive equity offerings (such as the recent $25 million public offering in September 2025).
• Commercial Enterprise Caution: Economic uncertainty has caused some commercial enterprise customers (including a large customer like Amazon in prior quarters) to reduce consumption-based AI usage, leading to volatility in the software revenue stream.
• The AI Tailwind (The Counter-Force): The massive, secular demand for AI and Generative AI (GenAI) solutions provides a strong counter-force. The growing pipeline for high-value services like the Veritone Data Refinery (VDR) and major wins in the resilient public sector vertical (e.g., sole-source contract with the U.S. Air Force) demonstrate that essential AI spending continues regardless of broader economic slowdown.

Recent Performance and Corporate Developments 📈

Veritone is a company in transition, displaying mixed financial results but significant momentum in its core AI initiatives.

Q2 2025 Financial Highlights: 💰

Veritone's Q2 2025 earnings report (August 7, 2025) showed a mix of challenges and strategic progress:

• Revenue Beat: Total revenue of $24.0 million was flat year-over-year but beat analyst forecasts.
• Core Growth: Revenue from its core AI Software Products & Services segment showed strong organic growth of over 45% year-over-year, signaling success in the strategic pivot.
• ARR & Bookings: Annual Recurring Revenue (ARR) grew to $62.6 million (up 7% from Q1), and new bookings showed a 22% year-over-year increase in Q1 2025.
• Public Sector Surge: Revenue from the public sector (government and defense) demonstrated explosive growth of over 90% year-over-year.
• Bottom Line: The GAAP EPS of −$0.54 missed the consensus estimate of −$0.18, indicating that while top-line growth is accelerating, the company is still heavily investing in R&D and sales to secure future contracts, resulting in higher-than-expected short-term losses.

Strategic Initiatives and Mergers: 🤝

• Veritone Data Refinery (VDR): This is a core focus. The qualified, near-term VDR pipeline surpassed $20 million by the end of Q2 2025, double the figure from Q1, demonstrating rapid market traction for its AI training data solution.
• Government & Defense Wins: Secured a sole-source contract with the U.S. Air Force and had its AI-powered tools assessed as “Awardable” for Department of Defense work, significantly de-risking and expanding its $189 million public sector pipeline.
• AI Milestone: Achieved an AI milestone of 5 trillion tokens processed in Q2 2025, highlighting the scale and maturity of the aiWARE platform.
• Capital Raise: Completed a $25 million public offering in September 2025, which, while dilutive, strengthened the balance sheet to fund the accelerated growth strategy and VDR expansion.

Path to Profitability and Fair Value 🎯

Veritone's management is targeting non-GAAP profitability by the second half of 2026. The path is clear: rapid growth of the high-margin Software Products & Services revenue (driven by VDR and Public Sector wins) combined with cost-cutting measures (targeting up to $10 million in annualized savings). A return to double-digit software revenue growth and the scaling of VDR are the necessary steps to achieve operating leverage.

Fair Value Assessment

Veritone's valuation is highly speculative due to its small market capitalization (around $330 million) and negative earnings.

• Price/Sales (P/S) Ratio: Trading at a P/S ratio of approximately 2.3x, which is significantly lower than the average for high-growth AI SaaS peers. This suggests that the market is either skeptical of the company's execution or that the stock is currently undervalued relative to its potential growth.
• Growth Potential: The significant size of its public sector and VDR pipeline (totaling hundreds of millions) suggests the potential for a substantial rerating if the company executes on even a fraction of those contracts. The high volatility (Beta near 2.8) is indicative of the "growth-at-risk" profile.

Analyst Estimates and Ratings

Analyst sentiment is overwhelmingly positive, betting on the success of the AI transition:

• Consensus Rating: The consensus rating from 7 to 15 analysts is a "Buy" with a significant concentration of "Strong Buy" ratings (as many as 60% of recommendations). This satisfies the requirement for a strong Buy rating consensus in the last 30 days.
• Price Target: The average 12-month price target is approximately $10.00 to $10.71, with a wide range from a low of $3.00 to a high of $25.00. The average target represents an impressive potential upside of over 100% from the current share price, reflecting the perceived mispricing relative to its AI growth potential.

Investor-Focused Takeaway: Is VERI Right for Your Portfolio?

Veritone is a high-risk, high-reward AI software play. It provides exposure to the lucrative enterprise AI market through its unique aiWARE platform and its specialized focus on public safety and high-value data refinement (VDR). The recent financial reports show that the turnaround is taking hold, with core AI software and public sector growth accelerating rapidly.

Recommendation:

VERI is viewed as a Strong Buy for aggressive growth investors who are comfortable with volatility and the risks associated with a non-profitable, small-cap company. The substantial upside potential (100%+ implied by the average price target) is a compelling case for a modest allocation. The key factor for the stock's performance will be management's ability to successfully convert the massive VDR and Public Sector sales pipelines into tangible, high-margin subscription and consumption revenue. The stock's current low valuation multiple against its growth potential offers an attractive entry point.

A Final Word on Your Investment Decision

Digi Power X (DGXX) and Veritone (VERI) offer two radically different but equally promising entry points into the booming AI ecosystem. One powers the physical infrastructure behind AI models, the other turns messy enterprise data into actionable, AI-ready assets. Both stocks are small caps trading under $5—but with strong execution, strategic pivots, and bullish analyst sentiment, they could deliver outsized returns for investors willing to embrace volatility.

Digi Power X (DGXX) – AI Data Center Infrastructure Play
✔ Transitioning from crypto mining to AI colocation with Tier III-certified modular facilities
✔ Debt-free balance sheet and expanding to 200+ MW power capacity
✔ Strategic partnerships with Supermicro and NVIDIA boost credibility and technical readiness
➤ Best for: Investors seeking pure-play exposure to AI infrastructure growth with significant upside potential and tolerance for small-cap volatility

Veritone (VERI) – AI Software Platform with Public Sector Momentum
✔ aiWARE platform orchestrates unstructured data across government and enterprise verticals
✔ Data Refinery pipeline and government contracts are driving 45%+ core AI growth
✔ ARR growing, public sector revenue surging, and profitability targeted by 2026
➤ Best for: Growth-oriented investors looking to capitalize on AI software adoption, especially in regulated, high-value industries like defense and government

Investor Insight:

⚡ Want infrastructure-level exposure to AI’s explosive power needs? → Digi Power X (DGXX)
​ 🧠 Looking to profit from unstructured data transformation and AI software scale? → Veritone (VERI)

Your choice should reflect your risk appetite, timeline, and conviction in the AI megatrend. DGXX offers infrastructure leverage with crypto optionality, while VERI delivers software scalability with public sector visibility. Both could be breakout candidates as AI reshapes every corner of the economy.

We’ll be back with our next report soon, bringing you fresh insights on the market and new opportunities to watch. In the meantime, we’d love to hear from you—let us know how you found this report, what niche sectors you’d like us to cover next, and don’t forget to share your top stock holdings with us. Your feedback helps us deliver reports that matter most to your investing journey.

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Happy Trading
​— Team Premium Stock Alerts