Shares of Riot Platforms (RIOT) experienced a significant 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 transition from bitcoin mining to 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 increase 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 bitcoin. This move signals growing lender confidence in the company'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. 'The market is factoring in a lower cost of capital as the expanded AMD deal drives lender confidence,' stated 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 by opening their data centers to non-mining activities. However, following pressure from activist investor Starboard to accelerate its transition from bitcoin mining to an AI infrastructure provider, the company has started to expand its data center business to host AI computers, a move that appears to be yielding positive results. 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 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 by nearly 17%.
In addition to its strategic expansion, the company 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, marking a significant shift from its previous strategy of holding onto all its mined bitcoin.