Bitcoin Miners Pivot into AI Landlords

Riot Platforms spent years using enormous amounts of electricity to mine bitcoin. Now it is making the shift toward renting out its power infrastructure to AI companies including Anthropic and chipmaker AMD.

Investors have taken notice.

As of Sept. 22, Riot shares had gained roughly 86% over the preceding six months, compared with gains of about 15% to 19% for bitcoin-mining rivals IREN, TeraWulf and Core Scientific. The S&P 500 rose about 19% over the same period.

In building its bitcoin-mining business, Riot secured land, substations and large connections to the electrical grid long before the current AI boom. Those assets have become increasingly valuable as data-center demand grows faster than the U.S. grid can add new capacity.

Riot’s bitcoin-mining business produced a 30.4% gross margin in the second quarter, compared with an 84.2% gross margin on its recurring data-center operating leases.

“When you look at profitability, that margin differential between AI and bitcoin mining is quite a bit different,” said John Todaro, managing director of crypto and high-performance computing and AI equity research at Needham & Company.

The company is now turning its Rockdale, Tex., bitcoin-mining campus, about 60 miles northeast of Austin, into AI data-center infrastructure and signing long-term agreements that increasingly make Riot look less like a cryptocurrency miner and more like a landlord for high-performance computing, or HPC.

Riot says it controls roughly 2 gigawatts of approved power capacity, including about 1.7 gigawatts that is already energized across its major Texas sites.

In bitcoin mining, Riot uses electricity itself, running specialized computers that compete to produce new bitcoin. Its profits can swing with the price of bitcoin, electricity costs and competition from other miners.

“There’s nothing that realistically happens that even approaches the cash flow that you’re able to get from the megawatts,” Riot Chief Executive Jason Les said in a September interview with McNallie Money.

Bitcoin-mining revenue fell to $113.7 million in the second quarter from $140.9 million a year earlier as lower bitcoin prices and tougher mining conditions weighed on the business.

Riot’s biggest step toward the new model came this summer when it signed a 20-year agreement with Anthropic for 191 megawatts of computing capacity at Rockdale.

The agreement is expected to generate about $9.1 billion over its initial term.

Anthropic’s first 96 megawatts are expected to come online in December 2027, with the full 191 megawatts scheduled for June 2028.

Riot already had another major technology tenant at the campus. Chipmaker AMD expanded its lease to 50 megawatts this year, bringing Riot’s total contracted AI capacity at Rockdale to 241 megawatts.

“It is essentially a two-tenant campus carrying $9.8 billion of contracted data center revenue,” said Michael Donovan, an analyst at Compass Point.

Riot calls its approach a “Power First” strategy, reflecting the idea that its grid connections and electrical infrastructure have become central to the company’s value.

Other bitcoin miners are reaching the same conclusion.

TeraWulf is already generating revenue from its transition. It reported $31.9 million in high-performance-computing lease revenue in the second quarter, with more capacity under construction.

And in July, TeraWulf signed its own 20-year lease with Anthropic for about 401 megawatts at its Justified Data campus in Kentucky. The company expects the agreement to generate about $19 billion in contracted revenue over the initial term.

The TeraWulf deal illustrates how Riot’s landlord strategy is part of a broader transformation in bitcoin mining. Core Scientific, IREN, Hut 8 and CleanSpark are also pursuing AI or high-performance-computing projects.

Riot shares closed Friday, Oct. 9, at $16.89, down about 32% from their Sept. 22 close of $24.93. IREN closed at $35.19, TeraWulf at $13.77 and Core Scientific at $15.42.

Still, the multi-year contracts and Riot’s connection to the AI boom have been enough to draw investors who are buying into the strategy. 

“Riot’s ascension is simply a bird-in-the-hand strategy,” said Manuel Rellen, an investor and frequent poster on r/BitcoinMining.

“A miner can say it’s making the shift, but a long-term plan and a long-term lease are two different things.”