Riot Platforms (NASDAQ:RIOT) has signed a 20-year lease with a frontier AI lab worth about $9.1 billion in contract revenue, a deal large enough to reshape its story. Over the past 12 months, though, it lost $1.32 billion, and its gross margin over that stretch was negative 28.26%. In plain terms, the cost of delivering its revenue was higher than the revenue itself. That gap is the whole story. The company mines bitcoin in Texas and Kentucky and builds electrical equipment for other businesses. It is now turning its Texas power sites into data centers that it rents to AI tenants, with AMD as the first. The lease is large, so the stock now depends on Riot paying for a build that won’t produce rent until late next year.
The original business explains why the data center push matters. In the second quarter of 2026, each bitcoin Riot mined was worth $71,667 when it was produced, but the cost to mine one, counting depreciation on its machines, was $90,631. Mining revenue also fell from a year earlier, which Riot blamed on lower bitcoin prices and a more crowded network, while higher power costs raised its expenses. Growth came fastest from the engineering unit, which builds power equipment for outside customers. Its revenue rose to $37.3 million from $10.6 million a year earlier. Total revenue has grown about 122% a year over the past five years, but the company has not yet turned that growth into profit. For a deeper dive into institutional shifts in the crypto mining and data center space, check out Dan Loeb’s Third Point Increased Its Reported Hut 8 Stake and Disclosed Riot Debt Exposure.
The Lease Pays Off Late Next Year
The AI lease is what changes the picture. It covers 191 megawatts at Riot’s Rockdale campus in Texas, and Riot estimates it would add between $365 million and $411 million a year in net operating income. The tenant also holds two five-year extension options.
But the first rent is a long way off. Riot expects to deliver the first 96 megawatts late next year and the full build the following summer. Until then, data center revenue comes mostly from the smaller AMD lease. That business brought in $23.2 million in the second quarter, but only $4.9 million of it was recurring rent, and the rest was one-time fit-out work for the tenant. For investors looking to add data center exposure, our list of 15 Best Data Center Stocks to Buy and Hold for the Next Decade is worth a look.
Funding the Build Is the Open Question
The lease pays only after Riot builds, and the build has to be funded first. For now, that money comes from a $573 million interim facility from Morgan Stanley, which Riot said will cover early development costs while an investment-grade credit backstop is finalized. Until that backstop is in place, the long-term financing for the biggest contract in the company’s history is not locked in.
Cash and bitcoin offer some protection, with more than $1.2 billion in liquid assets at the end of the second quarter. Much of that total is bitcoin, though, and some of the coins were held as collateral. The cushion therefore moves with the same price that has already hurt the mining business.
Investors Are Pricing Riot on Contracts
Hedge funds, whose quarterly filings reveal what they own, are adding, since the number holding Riot rose to 55 in the second quarter of 2026 from 49 in the first. That suggests they are betting the Rockdale build gets funded and delivered. Short sellers, who borrow shares and profit if the price falls, have bets equal to 12.85% of shares outstanding, a wager that the funding or the bitcoin business slips first.
For a shareholder, that makes Riot a wager on execution more than on current results. You are backing a build that still needs funding while the business keeps losing money. Investors who want more stocks under $20 can see our ranking of 10 Best US Stocks to Buy Under $20: Ranked by Hedge Funds.
Whether the build gets funded has a partial answer so far, because the lease is signed and early funding is in place while the long-term financing is not. The thing to watch in Riot’s next quarterly report is whether the investment-grade backstop arrives to replace the Morgan Stanley interim facility.
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This article is originally published at Insider Monkey.
