Bitcoin miner Riot's shares jump 8% after expanding AMD data center deal, signaling AI pivot
TL;DR
Riot Platforms' shares rose 8% after AMD expanded its data center deal, increasing capacity to 50 MW. This move reflects Riot's shift from bitcoin mining to AI and high-performance computing.
Key points
- Riot's shares increased by 8%
- AMD expanded its capacity at Riot's Texas campus
- Riot's capacity increased to 50 MW with potential for 150 MW
- Expected revenue from AMD deal is $636 million over 10 years
- Riot improved terms on a $200 million bitcoin-backed credit facility
Mentioned in this story
Riot Platforms (RIOT) shares jumped about 8% on Friday after Advanced Micro Devices (AMD) expanded its capacity at the company’s Rockdale, Texas campus, highlighting Riot’s continued pivot from bitcoin mining into AI and high-performance computing.
According to the Q1 financial results, AMD exercised an option to double its contracted capacity to 50 megawatts (MW), with the potential to upsize to 150MW. According to the earnings transcript, Riot said the agreement could generate roughly $636 million over a 10-year term.
Riot also secured improved terms on its $200 million bitcoin-backed credit facility with Coinbase, lowering the rate to a fixed 6.15% from 8.3% and releasing 1,544 of pledged collateral bitcoin, signaling growing lender confidence in its expanding data center business.
Together with the AMD deal and improved credit terms, investors are paying a premium for the stock. “Market pricing in lower cost of capital as the expanded AMD deal drives lender confidence,” said Matthew Sigel, head of digital assets research at VanEck.
Riot was one of the last few 'pure play' mining companies left that didn't get into hosting AI computing, while others opened up their data centers to move away from mining. Until recently, activist investor Starboard started to urge the management to accelerate its transition from bitcoin mining to an AI infrastructure provider.
Riot shares performance in the last 12 months (TradingView)
The move to expand its data center business to host AI computers appears to be paying off 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 fell to $111.9 million from $142.9 million, mainly due to lower bitcoin prices and increased mining competition. The mining company's shares are up about 147% over the last 12 months, while bitcoin fell nearly 17%.
The company, which previously held onto all its mined bitcoin, is also accelerating its bitcoin sales. According to Bitcoin Treasuries data, the company sold 3,688 BTC during Q1. The company ended March with 15,679 BTC and $282.5 million in cash.
Read more: The bitcoin treasury boom is unwinding as some companies and governments sell holdings
Q&A
What is the significance of Riot Platforms' deal with AMD?
The deal with AMD allows Riot to double its data center capacity to 50 MW, indicating a strategic shift towards AI and high-performance computing.
How much revenue is Riot expected to generate from the AMD agreement?
Riot anticipates generating approximately $636 million over a 10-year term from the expanded AMD deal.
What changes did Riot make to its bitcoin-backed credit facility?
Riot improved its bitcoin-backed credit facility terms with Coinbase, reducing the interest rate from 8.3% to 6.15% and releasing 1,544 bitcoins as collateral.
