Bitcoin Miner Riot Platforms Just Signed a $9 Billion Compute Deal With Anthropic. Why AI Is Now the Key to Valuing Bitcoin Mining Stocks.

Bitcoin mining company Riot Platforms has struck a lucrative $9 billion deal to provide AI computing power to Anthropic, a leading AI research organization. This strategic move highlights the growing significance of artificial intelligence in the valuation of crypto-mining companies amidst a challenging cryptocurrency market. Bitcoin's value has dropped nearly 28% this year, making it difficult for mining firms to rely solely on Bitcoin as an asset.

However, Bitcoin mining facilities, already equipped with data centers, have been repurposed to support the AI revolution. These data centers boast advantages such as pre-acquired land, power grid connections, and operational readiness. Transitioning Bitcoin miners to AI requires procuring specialized GPUs, managing cooling systems, and obtaining new permits.

Riot's $9.1 billion agreement with Anthropic spans 20 years, with two five-year extension options, potentially generating an additional $7 billion in revenue. The initial deal involves 191 megawatts (MW) of capacity, with the possibility of expanding to 200 MW. Despite generating only around $23 million in revenue from its data center division in the second quarter, Riot's full-scale AI operations could yield $450 million annually.

Investors often gauge the value of AI-focused neocloud stocks by assessing their total capacity and pricing accordingly. Riot Platforms, with a market cap of $7.1 billion, holds 1.7 gigawatts of approved compute capacity, positioning it favorably in the neocloud sector. While the company's stock performance may not yet reflect its potential, the company's strategic shift to AI computing and substantial contracted power capacity presents an attractive opportunity for investors.