Shares of Riot Platforms (RIOT) experienced an 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 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 scale up to 150MW.
The agreement is expected to generate approximately $636 million over a 10-year period, as per the earnings transcript. Furthermore, Riot has 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 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. 'The market is factoring in a lower cost of capital, driven by the expanded AMD deal, which is boosting lender confidence,' stated Matthew Sigel, head of digital assets research at VanEck. Until recently, Riot was one of the few remaining 'pure play' mining companies that had not ventured into hosting AI computing, while its peers were transitioning their data centers away from mining. 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, representing 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%. In addition to its strategic shift, Riot, which previously retained all its mined bitcoin, is now accelerating its bitcoin sales. According to Bitcoin Treasuries data, the company sold 3,688 BTC during Q1, and ended March with 15,679 BTC and $282.5 million in cash.