Activist investor pushes Riot Platforms to speed up AI transition

Activist investor Starboard Value sent a letter to top executives of bitcoin miner Riot Platforms (RIOT) on Wednesday.

The letter urged the company to ramp up the pace at which it lands artificial intelligence and high-performance computing (HPC) deals.

While a number of bitcoin miners have pivoted away from the crypto space to focus on AI data center infrastructure and HPC services as BTC mining has become increasingly less profitable, Riot is actually doubling down on both its mining and AI businesses.

In the letter, addressed to CEO Jason Les and Executive Chairman Benjamin Yi, Starboard noted that the company "has begun a meaningful transformation," but that its "share price has materially underperformed peers who have signed sizable AI/HPC deals."

“AI/HPC companies have announced ambitious plans to scale their capacity exponentially over the next few years,” Starboard wrote. “In such a dynamic and rapidly evolving AI/HPC demand environment, Riot must urgently seize this extraordinary opportunity.”

Starboard has a 3.4% stake in Riot.

Riot announced last month that it had acquired 200 acres of land in Texas and signed a lease with Advanced Micro Devices, Inc. (AMD), its first data center customer.

The agreement with AMD, a semiconductor hyperscaler, begins with an initial deployment of 25 MW of critical IT load capacity to be delivered in phases that began in January and will be completed in May 2026.

The deal includes the potential for additional expansion of up to a total of 200 MW of critical IT load capacity.

The deal is worth approximately $311 million of contract value across the initial 10-year term for 25 MW of critical IT load capacity, and about $1 billion of contract value if all three five-year extension options are exercised by AMD.

“It is a small proof of concept deal,” Starboard said of the AMD deal. “We, like you, expect significantly more.”

Power supply gives Riot 'tremendous opportunity'

Les noted in a statement that with its latest land acquisition in Texas, its fully approved data center power portfolio has now been expanded to 1.7 gigawatts, and said the deal with AMD "firmly establishes Rockdale as a leading data center development opportunity."

This amount of power gives Riot "a tremendous opportunity for value creation," Starboard said.

“Based on our diligence, we believe there are no material impediments to building world-class data centers on these sites, and with locations just outside of major metro markets, they are well-suited for AI training, inference, edge, or just about any data center application a customer could want,” the firm added.

“Because of these attractive characteristics, we believe that Riot’s sites are better than most of the sites for which deals have been announced.”

With its latest land purchase, Riot now owns and manages over 1,100 acres across two facilities in Texas, separated by approximately 100 miles.

The company said it has an "unrivaled, leading position" in what is known as the "Texas Triangle," which is a formation of the major urban centers of Texas bounded by Austin, Dallas, Houston and San Antonio.

Starboard estimates that the potential equity value of Riot's data centers is between $9 billion to $21 billion when factoring in the costs to build out its remaining data-center capacity.

The firm also sees the potential for Riot to generate $1.6 billion in annual earnings before interest, taxes, depreciation, and amortization if it is able to monetize its full power capacity at prices that are aligned with recent data center contracts.

Riot's stock gained 5.7% on Wednesday following news of Starboard's increased stake.

The company's stock has risen 34% over the past year, but has trailed the surging share prices of other bitcoin miners like Hut 8 Corp. (HUT), which is up 171% over the past year, TeraWulf Inc. (WULF), up about 227%, and Cipher Mining Inc. (CIFR), which has added more than 161%.

“Although this underperformance is frustrating, we believe that Riot is better positioned to do higher-quality deals than its peers,” Starboard said.