Shares of Riot Platforms (RIOT) experienced a significant 8% surge on Friday following the announcement that Advanced Micro Devices (AMD) would be expanding its presence at the company's Rockdale, Texas campus. This development highlights Riot's ongoing transition from a 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. This agreement is anticipated to generate approximately $636 million over a 10-year term.
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 increasing lender confidence in the company'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 Matthew Sigel, head of digital assets research at VanEck, noted, 'The market is factoring in a lower cost of capital due to the expanded AMD deal, which is driving lender confidence.' Riot was one of the last remaining 'pure play' mining companies that had not yet ventured into hosting AI computing.
However, with activist investor Starboard urging the management to accelerate its transition from bitcoin mining to an AI infrastructure provider, the company appears to be shifting its focus. The expansion of its data center business to accommodate AI computing seems to be yielding positive results for the Castle Rock, Colorado-based company. The firm reported a 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 mining competition, the company's shares have risen by approximately 147% over the last 12 months. In contrast, the value of bitcoin has fallen by nearly 17% during the same period.
Additionally, the company, which previously retained all its mined bitcoin, is now accelerating its sales of the cryptocurrency. According to data from Bitcoin Treasuries, Riot sold 3,688 BTC during Q1, ending the quarter with 15,679 BTC and $282.5 million in cash.