Shares of Riot Platforms (RIOT) experienced a significant 8% increase on Friday, driven by the announcement that Advanced Micro Devices (AMD) would be expanding its capacity at Riot's Rockdale, Texas campus. This development highlights Riot's ongoing pivot towards artificial intelligence and high-performance computing, marking a strategic shift from its traditional focus on bitcoin mining. According to the company's Q1 financial results, AMD has exercised an option 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 term, as per the earnings transcript.
Furthermore, 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 bitcoin. This move 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, with market pricing reflecting lower costs of capital as the expanded AMD deal drives lender confidence, according to Matthew Sigel, head of digital assets research at VanEck.
Riot was one of the last remaining 'pure play' mining companies that had not yet ventured into hosting AI computing, while its peers were transitioning away from mining by opening up their data centers. However, with activist investor Starboard urging the management to accelerate its transition from bitcoin mining to an AI infrastructure provider, Riot's strategic shift appears to be yielding positive results.
The company's decision to expand its data center business to host AI computers seems to be paying off, with total revenue for the quarter ended March 31 reaching $167.2 million, up from $161.4 million a year earlier, supported by $33.2 million in initial data center revenue. Although bitcoin mining revenue declined to $111.9 million from $142.9 million due to lower bitcoin prices and increased mining competition, the company's shares have surged approximately 147% over the last 12 months, while bitcoin prices have fallen nearly 17%. Additionally, Riot, which previously retained all its mined bitcoin, is now accelerating its bitcoin sales, having sold 3,688 BTC during Q1, according to Bitcoin Treasuries data.
As of March, the company held 15,679 BTC and $282.5 million in cash.