Shares of Riot Platforms (RIOT) experienced an 8% increase on Friday, driven by the announcement that Advanced Micro Devices (AMD) has expanded its capacity at Riot's Rockdale, Texas campus. This development highlights Riot's ongoing pivot from bitcoin mining towards artificial intelligence 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 to scale up to 150MW.
The agreement is expected 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 bitcoins. This move signals growing lender confidence in Riot's expanding data center business. The combined impact of the AMD deal and improved credit terms has led investors to pay a premium for the stock, with 'market pricing in lower cost 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 ventured into hosting AI computing, while its peers had begun to diversify their operations. However, following pressure from activist investor Starboard to accelerate its transition from bitcoin mining to an AI infrastructure provider, Riot appears to be reaping the benefits of expanding its data center business to host AI computers. The company reported total revenue of $167.2 million for the quarter ended March 31, a increase from $161.4 million in the same period last year, 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 mining competition, the company's shares have surged 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, 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.