Riot Platforms Shouldn't Be Worth More Than Cipher Digital
Key Points
Cipher Digital has 3.3 more gigawatts in its portfolio than Riot Platforms.
Although Riot Platforms has higher sales now, Cipher Digital is projected to 7x its net operating income next year.
As the value of active data center megawatts continues to rise, Cipher Digital's larger backlog will enable it to significantly outperform Riot Platforms.
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Is Cipher Digital (NASDAQ: CIFR) undervalued, or is Riot Platforms (NASDAQ: RIOT) overvalued? That's the question I asked myself when comparing the two companies.
Both are pivoting away from their crypto mining roots, but though Cipher Digital has secured more land for expansion, Riot Platforms now has a higher market cap. Here's what investors should know when assessing these growth stocks.
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Cipher Digital's gigawatt pipeline is more impressive
Riot Platforms currently has a 2-gigawatt portfolio to go along with its $7 billion market cap. Cipher Digital, by contrast, has a 5.3-gigawatt portfolio, but only a $6 billion market cap. The slight differences in market caps and the vast difference between total gigawatts prompted this analysis.
A closer look at their respective portfolios further favors Cipher Digital. It has 907 megawatts of operating and contracted capacity, and three deals with some of the world's leading hyperscalers. Riot Platforms is only delivering 25 megawatts of compute to Advanced Micro Devices (NASDAQ: AMD) right now, with an additional 216 megawatts of contracted power to be delivered between Advanced Micro Devices and Anthropic.
The 191-megawatt Anthropic deal is expected to be delivered in two phases. The first 96 megawatts will be ready to go in December 2027, while the remaining 95 megawatts will be delivered in June 2028. Riot Platforms expects to deliver an additional 10 megawatts to Advanced Micro Devices in November and wrap up the final 15-megawatt delivery in May 2027.
It feels a lot smaller than what Cipher Digital is doing. The company already anticipates net operating income jumping from $97 million in 2026 to $686 million in 2027.
Securing land and power will get more difficult
It will be hard for Riot Platforms to close the 3.3-gigawatt gap between the companies, especially when Cipher Digital is looking to secure more land and power. However, getting those two key resources will get more difficult in the years ahead.
The cat is completely out of the bag for the artificial intelligence data center opportunity. Nearly 3,000 data centers are under construction or planned across the United States. With the early stages of this "gold rush" behind us, it will be more challenging and expensive to secure suitable sites and the reliable sources of electricity to power them moving forward.
That won't make it impossible for Cipher Digital and Riot Platforms to acquire more sites. However, it places a higher premium on the value of existing power and infrastructure. That premium favors Cipher Digital, as it has a larger number of gigawatts already secured for the sites it has in its pipeline.
Current revenue numbers do not matter
One explanation for why Riot Platforms has a higher market cap than Cipher Digital today is its current revenue. Riot Platforms reported $174.2 million in Q2 revenue, which included $23.2 million in data center revenue. Meanwhile, Cipher Digital only generated $25 million in the second quarter.
That results in Riot Platforms looking like the cheaper stock on the surface, with a price-to-sales ratio (P/S) of 11.3 compared to Cipher Digital's 38.5.
These metrics, however, are snapshots based on previous revenues, and they don't factor in the companies' pipelines, nor the fact that Cipher Digital expects to 7x its net operating income in a single year.
Riot Platforms and Cipher Digital still make most of their money from crypto mining, but they are pivoting toward AI data centers and have signed lucrative deals with long-term tenants. Cipher Digital has a much deeper backlog, and as the company brings more of its gigawatts online, the average price per megawatt that it is collecting should continue to increase. That will further extend the gap between Cipher Digital's annual recurring revenues and Riot Platforms' results.
For all of these reasons, Cipher Digital is the clear winner between these two stocks.
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Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices. The Motley Fool has a disclosure policy.
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