Shares of Riot Platforms (RIOT) experienced a significant 8% increase on Friday following the announcement of Advanced Micro Devices' (AMD) expansion of its capacity at Riot's Rockdale, Texas campus. This development highlights Riot's ongoing transition from bitcoin mining to 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 period. Additionally, 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 bitcoin. This move signals growing lender confidence in the company's expanding data center business.
The combination of the AMD deal and improved credit terms has led investors to pay a premium for the stock, with market analysts citing lower cost of capital as a key factor. 'The market is pricing 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 their operations. However, with activist investor Starboard urging the company to accelerate its transition from bitcoin mining to an AI infrastructure provider, Riot's strategic shift appears to be yielding positive results. The company's decision to expand its data center business to host AI computers seems to be paying off, with total revenue reaching $167.2 million for the quarter ended March 31, up from $161.4 million in the previous 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 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%. Furthermore, 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.