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 efforts to pivot from bitcoin mining towards artificial intelligence (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 potential for further expansion 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 Riot's expanding data center business. The combined effect 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.
Riot was one of the last 'pure play' mining companies to diversify into AI computing, while its peers had already begun hosting AI computing services. Recently, activist investor Starboard urged the management to accelerate its transition from bitcoin mining to an AI infrastructure provider.
The decision to expand its data center business to host AI computers appears to be yielding positive results for the Castle Rock, Colorado-based company. The firm reported total revenue of $167.2 million for the quarter ended March 31, up from $161.4 million a year earlier, supported by $33.2 million in initial data center revenue. However, bitcoin mining revenue declined to $111.9 million from $142.9 million, primarily due to lower bitcoin prices and increased mining competition. Over the last 12 months, the mining company's shares have risen by approximately 147%, while bitcoin has fallen nearly 17%.
The company, which previously retained all its mined bitcoin, is also accelerating its bitcoin sales. According to Bitcoin Treasuries data, the company sold 3,688 BTC during Q1, ending March with 15,679 BTC and $282.5 million in cash.