Many billionaire investors have gained Nvidia‘S (NASDAQ:NVDA) Stock as it has risen sharply in recent years. That wasn’t surprising, as the company’s rapid sales of artificial intelligence (AI)-focused data center GPUs made it one of the market’s fastest-growing stocks.
Still, it wasn’t surprising to see some of these big investors reduce their exposure to the chip maker after the chip rose 2,100% over the past five years. Nvidia continues to grow like a weedbut it still faces longer-term challenges such as export restrictions to China, potential antitrust investigations and competition from other AI chipmakers. The macroeconomic headwinds could also eventually lead more companies to limit their spending on new AI software and hardware.
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According to their latest 13F filings, some billionaires have sold their Nvidia shares. Millennium Management’s Israel Englander reduced its stake in Nvidia by 12.5% in the third quarter of 2024. Yan Huo of Capula Management reduced his stake in Nvidia by 27.7% in the third quarter.
But at the same time, these two closely watched billionaire investors increased their exposure to Bitcoin (CRYPTO:BTC) through the popular iShares Bitcoin Trust ETF (NASDAQ:IBIT). In the third quarter, Englander increased his position in the exchange traded fund (ETF) by 12.6 million shares, while Huo purchased an additional 1.1 million shares.
This move from Nvidia to Bitcoin suggests this world’s leading cryptocurrency could still have room for improvement after rising more than 1,000% in the last five years. Cathie Wood, who holds Bitcoin through Ark Invest 21Shares Bitcoin ETF(NYSEMCT:ARKB)sees its price rising from about $100,000 to $3.8 million by 2030. If that happens, these spot price ETFs could rise a whopping 3,700% over the next five years. This rally would turn a modest $10,000 investment into $380,000.
Investors should take these optimistic estimates with caution as it is still difficult to properly value Bitcoin. But let’s take a look at Bitcoin’s potential catalysts and why it could be better than Nvidia and other growth stocks in the long run.
Bitcoin is mined using an energy-intensive proof-of-work (PoW) method, which currently requires powerful application-specific integrated circuit (ASIC) miners. The supply of 21 million Bitcoins is limited and 19.9 million of these coins have already been mined. Every four years, the reward for Bitcoin mining is halved through a planned “halving”. The last halving took place in April 2024 and the next one is scheduled for 2028.
This escalating difficulty will throttle the rate at which new Bitcoins are mined, and the final Bitcoin is expected to be mined by 2140. All of these characteristics make Bitcoin more similar to a precious metal such as gold or silver than other cryptocurrencies that are either “minted” or “minted.” (by creating new blocks on a blockchain) or paid out as a reward via 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 these 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 attempted to adopt Bitcoin as their national currency, and other countries struggling with inflation and currency devaluation issues could follow their lead. If this happens, more institutional investors are likely to increase their exposure to Bitcoin – particularly through easily traded spot price ETFs – driving the price even higher.
Bitcoin has more visible strengths than many other cryptocurrencies, but its true value is difficult to determine. If it really does rise 3,700% over the next five years, it would likely outperform Nvidia by a wide margin — because such a rally would boost the chipmaker’s market cap from $3.3 trillion to nearly $126 trillion.
Even Nvidia’s most optimistic investors probably don’t expect the company to get anywhere close to that valuation by 2030. However, this is harder to say with Bitcoin. Bitcoin’s market cap would rise from $2 trillion to about $76 trillion if its price reached $3.8 million. However, that valuation could 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.
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Leo Sun does not hold a position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Nvidia. The Motley Fool has one Disclosure Policy.
