Shares of Riot Platforms (RIOT) experienced an 8% increase on Friday following the announcement that Advanced Micro Devices (AMD) would be expanding its capacity at Riot's Rockdale, Texas campus, highlighting the company's ongoing transition from bitcoin mining to artificial intelligence and high-performance computing. According to the Q1 financial results, AMD opted to double its contracted capacity to 50 megawatts (MW), with the potential for further expansion to 150MW.
The agreement is anticipated to generate approximately $636 million over a 10-year period. Additionally, Riot 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 bitcoin. This development signals 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. 'The market is factoring in a lower cost of capital as the expanded AMD deal boosts lender confidence,' stated Matthew Sigel, head of digital assets research at VanEck. Riot was one of the last 'pure play' mining companies that hadn't ventured into hosting AI computing, while its peers opened their data centers to diversify beyond mining. However, with activist investor Starboard urging management to accelerate the transition from bitcoin mining to an AI infrastructure provider, the company's strategic shift appears to be yielding positive results.
The expansion of its data center business to accommodate AI computing has proven beneficial for the Castle Rock, Colorado-based company. The firm reported total revenue of $167.2 million for the quarter ending March 31, representing a increase from $161.4 million in the same period last year, driven by $33.2 million in initial data center revenue. Although bitcoin mining revenue declined to $111.9 million from $142.9 million, primarily due to lower bitcoin prices and heightened mining competition, the company's shares have surged approximately 147% over the last 12 months, while bitcoin has fallen nearly 17%.
The company, which previously retained all its mined bitcoin, is also accelerating its bitcoin sales, having sold 3,688 BTC during Q1. As of March, the company held 15,679 BTC and $282.5 million in cash.