Some big institutional investors are pivoting from the AI chipmaker toward the world’s top cryptocurrency.
Many billionaire investors loaded up on Nvidia‘s (NVDA 3.10%) stock as it soared over the past few years. That wasn’t surprising, since its soaring sales of artificial intelligence (AI)-oriented data center GPUs turned it into one of the market’s hottest growth stocks.
Yet it also wasn’t surprising to see some of those big investors reduce their exposure to the chipmaker after its 2,100% run over the past five years. Nvidia is still growing like a weed, but it still faces longer-term challenges like export curbs against China, potential antitrust probes, and competition from other AI chipmakers. The macro headwinds could also eventually drive more companies to rein in their spending on new AI software and hardware.
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According to their latest 13F filings, some billionaires have been selling their Nvidia shares. Millennium Management’s Israel Englander reduced his position in Nvidia by 12.5% in the third quarter of 2024. Capula Managment’s Yan Huo trimmed his stake in Nvidia by 27.7% in the third quarter.
But at the same time, these two closely watched billionaire investors boosted their exposure to Bitcoin (BTC 1.41%) through the popular iShares Bitcoin Trust ETF (IBIT 4.43%). During the third quarter, Englander increased his position in the exchange-traded fund (ETF) by 12.6 million shares as Huo scooped up another 1.1 million shares.
This shift from Nvidia toward Bitcoin suggests the world’s top cryptocurrency might still have room to run after soaring more than 1,000% over the past five years. Cathie Wood, who holds Bitcoin through Ark Invest’s 21Shares Bitcoin ETF (ARKB 4.36%), sees its price soaring from about $100,000 to $3.8 million by 2030. If that happens, these spot price ETFs could surge by a whopping 3,700% over the next five years. That rally would turn a modest $10,000 investment into $380,000.
Investors should take those bullish estimates with a grain of salt, since Bitcoin is still tough to properly value. But let’s take a look at Bitcoin’s potential catalysts and why it might just outperform Nvidia and other growth stocks over the long term.
The bull case for Bitcoin
Bitcoin is mined using an energy-intensive proof-of-work (PoW) method that currently requires powerful application-specific integrated circuit (ASIC) miners. There’s a finite supply of 21 million Bitcoins, and 19.9 million of those coins have already been mined. Every four years, a scheduled “halving” cuts the rewards for mining Bitcoin in half. The most recent halving occurred in April 2024, and the next one is scheduled for 2028.
That escalating difficulty will throttle the rate at which new Bitcoins are mined, and the final Bitcoin is expected to be mined by 2140. Those qualities all make Bitcoin more similar to a precious metal like gold or silver than other cryptocurrencies that are either “minted” (by creating new blocks on a blockchain) or paid out as rewards through the less energy-intensive proof-of-stake (PoS) mechanism. That’s why the Securities and Exchange Commission (SEC) approved the first spot price ETFs for Bitcoin last January. The SEC also states that Bitcoin is the only cryptocurrency that can be classified as a commodity.
Many Bitcoin bulls believe those strengths make it a viable replacement for gold and other commodities as a hedge against inflation. El Salvador and the Central African Republic have already tried adopting Bitcoin as a national currency, and other countries struggling with inflation and currency devaluation issues might follow their lead. As that happens, more institutional investors will likely boost their exposure to Bitcoin — especially through easily traded spot price ETFs — and drive its price even higher.
But could Bitcoin really outperform Nvidia over the long run?
Bitcoin has more visible strengths than many other cryptocurrencies, but its true value is nearly impossible to determine. If it really soars 3,700% over the next five years, it would likely outperform Nvidia by a mile — since that kind of rally would drive the chipmaker’s market cap of $3.3 trillion to nearly $126 trillion.
Even Nvidia’s most bullish investors probably don’t expect it to come anywhere close to that valuation by 2030. But with Bitcoin, it’s harder to tell. Bitcoin’s market cap would surge from $2 trillion to about $76 trillion if its price hits $3.8 million, yet that valuation might be justified if it replaces gold — which has a market cap of $18.5 trillion — as the world’s most valuable asset. So if you believe Bitcoin still has a bright future, it might be smart to follow these billionaires and nibble on its spot price ETFs.
Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Nvidia. The Motley Fool has a disclosure policy.
