Riot Signs $9.1B, 20-Year AI Data Center Lease at Its Texas Bitcoin Mine

§ 01 Executive Snapshot

• What: Riot Platforms has signed a 20-year lease agreement for 191 megawatts of computing capacity at its Texas bitcoin mining campus with an unnamed AI company, expected to generate $9.1 billion in revenue.
• Who: Riot Platforms, unnamed AI company (referred to as 'one of the world's leading frontier AI labs'), AMD.
• Why it matters: This deal represents a significant pivot for Riot, transforming it into a major player in the data center space while leveraging its existing bitcoin mining infrastructure.

§ 02 Key Developments

• The lease is projected to generate approximately $9.1 billion in revenue over its term, averaging $457 million per year.
• Riot's bitcoin mining business produced $113.7 million in revenue in Q2 2023, down from $140.9 million a year earlier.
• Riot's cost to mine one bitcoin was $49,912 in Q2 2023, which rises to $90,631 when including depreciation, exceeding the mined bitcoin's worth.

§ 03 Strategic Context

• Riot has executed leases totaling 241 megawatts of capacity, representing about $9.8 billion in contracted revenue, indicating a strategic shift towards AI and data centers.
• The company is facing challenges in the bitcoin mining sector, prompting diversification into AI data centers, which could provide more stable revenue streams.

§ 04 Strategic Implications

• This lease agreement marks a significant shift in Riot's business model, potentially stabilizing revenue and reducing dependence on volatile bitcoin prices.
• The expected growth in AI data center demand could position Riot favorably in the tech infrastructure market, increasing its market competitiveness.

§ 05 Risks & Constraints

• The lease does not start generating revenue for over a year, creating a potential cash flow gap during the interim period.
• Riot's existing mining operations could face further financial strain if bitcoin prices remain low or mining costs continue to rise.

§ 06 Watchlist / Forward Signals

• The first 96 IT megawatts are expected to be delivered by December 2027, with full capacity by June 2028, marking key milestones for the project.
• Future developments in the AI sector and Riot's ability to secure additional tenants for its data centers will signal the success of this strategic pivot.