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 solely focusing on bitcoin mining to exploring opportunities in artificial intelligence (AI) and high-performance computing. According to the company's Q1 financial results, AMD has exercised its option to double its contracted capacity to 50 megawatts (MW), with the potential to further increase to 150MW.
As per the earnings transcript, this agreement is anticipated to generate approximately $636 million over a 10-year period. 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 growing confidence among lenders in the company's expanding data center business. The combined impact of the AMD deal and improved credit terms has led investors to assign a premium to 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 had begun to diversify by opening their data centers to non-mining activities.
Following urging from activist investor Starboard to accelerate its transition from bitcoin mining to an AI infrastructure provider, Riot's strategic expansion of its data center business to host AI computers appears to be yielding positive results. The company reported total revenue of $167.2 million for the quarter ending 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. However, revenue from bitcoin mining declined to $111.9 million from $142.9 million, primarily due to lower bitcoin prices and intensified mining competition. Over the last 12 months, the company's shares have surged by approximately 147%, while bitcoin has declined by nearly 17%.
Riot, which previously retained all its mined bitcoins, is also accelerating its sales of the cryptocurrency. According to data from Bitcoin Treasuries, the company sold 3,688 BTC during Q1, and as of the end of March, it held 15,679 BTC and $282.5 million in cash.