Rumble's AI Cloud Ambitions Surge with Northern Data Acquisition Amid Stock Rumble

Rumble announced plans on Monday to acquire cloud computing firm Northern Data in an all-stock transaction, a move aimed at strengthening its cloud infrastructure with Northern Data’s data centers and GPU operations. Tether, known for holding a 54% stake in Northern Data, has expressed support for the merger, having already invested $775 million in Rumble. This acquisition proposal, if proceeding, would see Northern Data shareholders receiving 2.319 newly-issued Rumble shares for each Northern Data share, resulting in Northern Data owning approximately one-third of the combined entity.

The merger is set to integrate Northern Data’s Ardent data center business and Taiga GPU-as-a-service operations, contributing over 20,000 Nvidia H100 GPUs and 2,048 H200s to Rumble’s cloud infrastructure. Northern Data’s data centers boast a potential energized capacity of about 850 MW, including a facility in Georgia anticipated to deliver 180 MW upon completion. Notably, the deal would make Tether the largest single shareholder of Rumble's Class A common stock, as part of its multi-million-dollar investment. Tether plans to exchange its Northern Data shares for Rumble stock and has committed to multi-year GPU purchases from Rumble while amending its loan terms to Northern Data to alleviate financial pressures post-merger.

Rumble CEO Chris Pavlovski would maintain voting control and sees the acquisition as positioning Rumble as a leader in AI-focused cloud computing, with a strong emphasis on privacy and infrastructure independence. The announcement came alongside Rumble’s report of rising revenues, although the company recorded a $30.2 million loss, equating to $0.12 per share, in the second quarter.

Rumble's stock experienced significant fluctuations, initially surging as much as 20% in pre-market trading before settling at a 7% increase from Friday’s close by the end of the trading session. Meanwhile, Northern Data’s shares, listed on European markets, closed the day nearly 20% lower.

Rumble's interest in acquiring the high-performance computing (HPC) specialist Northern Data is part of a broader strategy within the AI sector. Despite Northern Data not yet signaling openness to the acquisition offer nor specifying a valuation level, investors appeared optimistic during Monday’s trading session, pushing Rumble's stock higher. This acquisition initiative aligns with Rumble’s larger strategic goals, notwithstanding the company’s mixed quarterly performance and declining monthly active users, which highlight potential challenges in Rumble’s core streaming operations.

Rumble concluded the second quarter with an average of 51 million monthly active users, down from previous quarters, yet saw a 24% year-over-year rise in average revenue per user to $0.42. These dynamics illustrate ongoing uncertainties in Rumble’s streaming engagement and monetization, underscoring the importance of its broader growth strategies, including the proposed inclusion of Northern Data's AI and cloud capabilities.

Overall, Rumble’s acquisition plan represents a significant investment in AI and cloud computing, reflecting ambitions to expand its technological footprint while addressing the financial aspects of its current business challenges.