Shares of Riot Platforms (RIOT) experienced a significant surge of approximately 8% on Friday, following the announcement that Advanced Micro Devices (AMD) would be expanding its capacity at Riot's Rockdale, Texas campus. This development highlights Riot's ongoing transition from a primary focus on bitcoin mining to a more diversified approach, incorporating AI and high-performance computing.
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. The agreement is anticipated to generate roughly $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 confidence among lenders in Riot's expanding data center business. The combination of the AMD deal and improved credit terms has led investors to assign a premium value to the stock. As noted by Matthew Sigel, head of digital assets research at VanEck, 'the market is pricing in a lower cost of capital, driven by the expanded AMD deal and the resulting lender confidence.' 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 their data centers away from mining.
However, with the urging of activist investor Starboard to accelerate its transition from bitcoin mining to an AI infrastructure provider, Riot is now reaping the benefits of its expanded data center business. The company reported total revenue of $167.2 million for the quarter ending March 31, representing an increase from $161.4 million in the same period last year. This growth was supported 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 increased competition in the mining sector.
Over the last 12 months, the company's shares have risen by approximately 147%, while bitcoin has fallen by nearly 17%. In a notable shift, the company, which previously retained all its mined bitcoin, is now accelerating its bitcoin sales.
According to data from Bitcoin Treasuries, Riot sold 3,688 BTC during Q1, and as of March, the company held 15,679 BTC and $282.5 million in cash.