Shares of Riot Platforms (RIOT) experienced a significant 8% increase on Friday following the announcement that Advanced Micro Devices (AMD) would be expanding its capacity at Riot's Rockdale, Texas campus, marking a notable pivot towards AI and high-performance computing. According to the company's Q1 financial results, AMD has opted to double its contracted capacity to 50 megawatts (MW), with the potential for further expansion to 150MW. This agreement is anticipated to generate approximately $636 million over a 10-year period, as per the earnings transcript.
Additionally, Riot has secured more favorable terms on 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, indicating growing lender confidence in the company's expanding data center business. The combined effect of the AMD deal and improved credit terms has led investors to pay a premium for the stock, with market pricing reflecting a lower cost of capital driven by the expanded AMD deal and increased lender confidence, according to Matthew Sigel, head of digital assets research at VanEck. Riot was one of the last 'pure play' mining companies to diversify into hosting AI computing, whereas others had already begun to open their data centers to move away from mining.
Recently, activist investor Starboard urged the management to accelerate its transition from bitcoin mining to an AI infrastructure provider. The decision to expand its data center business to host AI computers appears to be yielding positive results for the Castle Rock, Colorado-based company. The firm reported total revenue of $167.2 million for the quarter ended March 31, up from $161.4 million a year earlier, supported by $33.2 million in initial data center revenue.
However, revenue from bitcoin mining declined to $111.9 million from $142.9 million, primarily due to lower bitcoin prices and increased mining competition. The company's shares have risen by approximately 147% over the last 12 months, while bitcoin has fallen nearly 17%.
Riot, which previously retained all its mined bitcoin, is also accelerating its bitcoin sales, with 3,688 BTC sold during Q1, according to Bitcoin Treasuries data. As of March, the company held 15,679 BTC and $282.5 million in cash.