Bitcoin has surged in 2020, with its price climbing roughly 150% year to date. After many months of volatile trading, the cryptocurrency has climbed back to the range of $18,000 per coin -- not far from the high of $19,738 per coin it hit at the end of 2017. With its price surging, bitcoin is generating tons of excitement again, but there could be even better investment opportunities in the technology sector.
We asked three Motley Fool contributors to profile a tech stock that they think will outperform bitcoin. Read on to see why they identified Impinj (NASDAQ:PI), Square (NYSE:SQ), Advanced Micro Devices (NASDAQ:AMD) as investments that could deliver big returns.
Seeking huge returns? Trends are your friend
Keith Noonan (Impinj): I haven't invested in bitcoin because I don't understand it. I've researched it along with other cryptocurrencies, but I still don't have a firm grasp on why prices should go up or down. I also have difficulty formulating why one open-source coin built on blockchain technology has a much better outlook than other coins, which seem to grow in number with each passing day.
However, I get that bitcoin has garnered support because bulls see it tapping into a variety of powerful trends and serving potentially valuable functions. While I don't understand bitcoin, I know that looking for technologies that can tap into and help shape influential trends can be a very rewarding approach to investing. Impinj stands out as one of my favorite growth bets in that mold.
Impinj makes radio-frequency identification (RFID) tags, readers, and software. The company's RFID tags can function like more advanced versions of the barcode system and be used to allow non-electronic items to store and transmit data. Gathering and analyzing valuable information will be at the heart of business success in the 21st century, and Impinj is providing solutions that are making it possible for a greater number of items and processes to be tracked.
The business has the potential to post dramatic growth as new use cases for RFID technologies emerge and adoption for the hardware, software, and support services increases. There's speculation involved in charting Impinj's trajectory, but the stock has the potential to be a huge winner for risk-tolerant investors.
The bitcoin facilitator
Joe Tenebruso (Square): First, let me say that I wouldn't recommend selling bitcoin now. As a contributor to The Motley Fool's Crypto Society service, I've been bullish on bitcoin for quite a while and believe that it could easily surge to new all-time highs. But rather than wax poetic about the venerable cryptocurrency itself, I'd like to focus investors' attention on another way to profit from bitcoin's rising popularity.
Square CEO Jack Dorsey is an ardent bitcoin bull. He sees a future in which it eventually becomes the "native currency" of the internet -- and he intends to help bring this vision to fruition. Under his leadership, Square began offering its users the ability to buy and sell bitcoin on its massively popular Cash App back in 2017. The digital payment company's bitcoin business has enjoyed torrid growth since then -- to the tune of $1.63 billion in revenue in the third quarter alone, an 11-fold year-over-year increase.
Square has also been investing directly in bitcoin. It purchased more than 4,700 bitcoins for an average price of roughly $10,600 in early October. With bitcoin trading near $18,000 today, that $50 million investment is now worth about $85 million. That's a 70% gain in a little more than a month.
Yet, importantly, Square sees bitcoin as much more than just a get-rich-quick scheme. "Square believes that cryptocurrency is an instrument of economic empowerment and provides a way for the world to participate in a global monetary system," the company said in its bitcoin purchase announcement. Square believes bitcoin aligns well with its goals and values, and Dorsey is positioning the fintech star -- and its shareholders -- to profit handsomely from the crypto revolution.
Put your chips on this semiconductor stock
Will Healy (Advanced Micro Devices): In 2017, during the height of the last bull bitcoin market, AMD produced the chips favored by cryptocurrency miners. However, investors today may want to look at mining profits in AMD stock itself.
Since Lisa Su took the CEO job in 2014, she has taken the fledgling chipmaker from near bankruptcy to industry leader. It has challenged NVIDIA in the GPU market. Due to its success, some even call AMD the new "gaming CPU king." AMD now powers the latest generation of Sony's PlayStation and Microsoft's Xbox game consoles, among other successes.
However, its most impressive feat is arguably turning the tables on longtime rival Intel. After decades of lagging Intel, AMD now sells a 7nm chip while Intel has found itself unable to progress beyond the 10nm processors.
For now, Intel remains the much larger producer. Still, AMD has gained significant ground.
In the latest quarter, Intel produced about 6.5 times as much revenue as AMD. In the year-ago quarter, Intel's revenue was nearly 11 times higher. The fact that AMD's revenue grew by 56% was a significant help, as was the 128% rise in adjusted earnings per share.
Moreover, even though analysts expect growth to slow somewhat next year, they still forecast a 50% surge in net income. At a forward P/E ratio of 48, this makes AMD stock look like a bargain despite its 70% stock price growth during 2020.