Starboard pushes Riot to harness AI energy to create billions of dollars of value

Starboard Value has called on Riot Platforms to seize what it sees as a major value creation opportunity by mobilizing its energy capacity to power data centers dedicated to AI and high-performance computing. In a letter to the company's CEO and executive chairman, the activist investor stressed that rapid action is essential to secure larger, more structuring deals that can fully exploit the potential of Riot's energy assets.

Riot's AI shift in the face of urgency

Peter Feld, managing partner of Starboard Value, acknowledged that the recently announced partnership between Riot and Advanced Micro Devices is a positive step forward. He stressed that this agreement highlights the strategic quality of the bitcoin miner's main sites. However, Feld sees this partnership as a first step rather than a real turning point, believing that larger and more ambitious contracts will be necessary to fully reflect the company's potential.

The Starboard manager also noted that the Riot's stock performance remained below that of its peers having already concluded significant agreements in AI and high performance computing. He said the market rewarded companies that moved quickly in AI infrastructure, while Riot's more cautious positioning weighed on its valuation.

Riot is part of a broader trend among publicly traded Bitcoin miners, which are repositioning toward AI by repurposing their energy-intensive infrastructure. When releasing its third quarter results, the company indicated that its Bitcoin mining strategy was evolving. However, Starboard seems unconvinced that this transition is progressing at a sufficient pace.

While this underperformance is frustrating, we believe Riot is better positioned to make higher quality deals than its peers. Time is running out, and renewed urgency is needed to finalize more ambitious agreements.

Peter Feld

Energy assets as a major driver of value

To support its analysis, Starboard highlighted Riot's two main sites in Corsicana and Rockdale. According to the investor, these infrastructures are particularly suited to the establishment of data centers dedicated to AI and high-performance computing. Together, these facilities provide approximately 1.7 gigawatts of energy capacity.

At this scale, Starboard estimates that developing AI and HPC businesses at Riot's sites could generate between $9 billion and $21 billion in equity value, significantly higher than the company's current market capitalization. Taking into account Riot's net cash position, the implied valuation per share could be between $23 and $53, excluding potential contributions from Bitcoin mining activities or engineering initiatives.

Reaching the high end of that range, or $53 per share, would imply an increase of about 242% from Wednesday's closing price of $15.49. Over the last six months, however, Riot shares have already increased by 29.52%, reflecting positive medium-term dynamics.

Starboard concludes that Riot is evolving into a model as a major data center operator dedicated to AI and high-performance computing, rather than remaining primarily a Bitcoin miner. While recognizing that this transition has been underway for more than a year, the activist investor emphasizes that competition is advancing rapidly in a very competitive environment. He believes that rapid execution will be key and suggests that, should difficulties arise, Riot's significant energy resources could make it an attractive acquisition target amid strong demand for such assets.