Shares of Riot Platforms experienced an 8% increase on Friday following the announcement that Advanced Micro Devices would be expanding its capacity at Riot's Rockdale, Texas campus. This development highlights Riot's ongoing transition from focusing primarily on bitcoin mining to exploring opportunities in AI and high-performance computing. According to the company's Q1 financial results, AMD has opted to double its contracted capacity to 50 megawatts, with the potential for further expansion to 150 megawatts.
The agreement is expected to generate approximately $636 million over a 10-year period. Additionally, Riot has secured more favorable terms for its $200 million bitcoin-backed credit facility with Coinbase, reducing the interest rate to a fixed 6.15% from 8.3% and releasing 1,544 pledged collateral bitcoins.
This shift is seen as a positive indicator of growing lender confidence in Riot's expanding data center business. The combination of the AMD deal and improved credit terms has led investors to pay a premium for the stock, with market analysts noting that the expanded AMD deal is driving lender confidence and lower cost of capital.
Riot's strategic move to diversify its business by hosting AI computing, a path not initially taken by the company, now appears to be yielding positive results. Unlike other mining companies that have diversified, Riot was one of the last 'pure play' mining entities.
However, with the urging of activist investor Starboard to accelerate its transition towards becoming an AI infrastructure provider, the company seems to be on a promising trajectory. The expansion of its data center business to accommodate AI computing appears to be paying off, with the company reporting a total revenue of $167.2 million for the quarter ending March 31, supported by initial data center revenue of $33.2 million. Although bitcoin mining revenue saw a decline to $111.9 million from $142.9 million due to lower bitcoin prices and increased mining competition, the company's shares have seen a significant increase of about 147% over the last 12 months, in contrast to bitcoin's 17% decline. Furthermore, Riot is accelerating its sales of mined bitcoin, having sold 3,688 BTC during Q1, and ending March with 15,679 BTC and $282.5 million in cash.