Why the Market Was so Thrilled With Riot Platforms Stock This Week

A research report singing the praises of the cryptocurrency mining sector was a key impetus behind Riot Platforms' (NASDAQ: RIOT) rise over the past few stock trading sessions. The Bitcoin (CRYPTO: BTC) specialist's shares were enjoying a nearly 11% lift week to date as of Friday before market open as a result, according to data compiled by S&P Global Market Intelligence.

A quartet of potential

Before market open on Wednesday, Piper Sandler prognosticator Patrick Moley published a report on Bitcoin mining companies. In his analysis, according to reports, he was particularly bullish about four of them -- Riot, Hut 8, Mara Holdings, and Canada-based Galaxy Digital.

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The crux of Moley's argument in favor of such operators is the promise of artificial intelligence (AI) and high-performance computing (HPC) data centers. The analyst believes that by pursuing arrangements with businesses that specialize in providing those services (rather than their traditional model of keeping their computing power in-house), these companies could boost their earnings before interest, taxes, depreciation, and amortization (EBITDA) by a factor of as much as 3 in certain cases.

The pundit went on to say that although numerous deals for such services have been agreed in the mining segment, he expects far more to be finalized this year. Of the four mentioned companies, in his view Riot has the highest level of production that could benefit from the shift.

Keep your eye on those price graphs

Although Moley makes a valid point, a great deal of the value of any cryptocurrency mining company is dependent on the price of the assets it specializes in. Very often, if Bitcoin is doing well, so are its miners. So even if AI and HPCs start to make a difference for companies like Riot, I think their value will remain strongly dependent on the trajectory of the coins and tokens associated with them.

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Eric Volkman has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.