During the past five years, Nvidia (NVDA 1.56%) has been one of the hottest tech stocks on the planet. In that time period, Nvidia rose more than 2,000%. It's the one stock that is most commonly associated with the artificial intelligence (AI) investment thesis, and there is still good reason to think Nvidia shares will continue to soar during the next 12 months.
Yet, according to recent 13F filings with the Securities and Exchange Commission, some top billionaire hedge fund managers are scaling back their positions in Nvidia. That's because they've found an asset that might just have a better long-term outlook than Nvidia. That asset, of course, is Bitcoin (BTC +2.50%).
Billionaires buying Bitcoin
Two billionaire hedge fund managers who have embraced Bitcoin are Israel Englander, head of Millennium Management, and Yan Huo, head of Capula Management. Collectively, they manage more than $120 billion in assets, so any moves they take may be emulated by other investors.
According to their latest 13F filings, both of these billionaires sold shares of Nvidia and increased their positions in the iShares Bitcoin Trust (IBIT +1.05%), which has become the most popular spot Bitcoin exchange-traded fund (ETF). In 3Q 2024, Englander reduced his stake in Nvidia by 13% and boosted his position in the iShares Bitcoin Trust by 116%. And Huo scaled back his position in Nvidia by 28%, while boosting his position in iShares Bitcoin Trust by nearly 15%.
Bitcoin's long-term upside potential
While we do not know the exact motivations of these two billionaire fund managers, we do know that the long-term potential upside of Bitcoin has always been one of its primary selling points. During the past two years, Bitcoin is up about 350%, and during the past decade it is up more than 40,000%. That type of performance is, well, eye-popping.
NASDAQ: IBIT
Key Data Points
While past performance is no guarantee of future results, there's plenty of reason to think that Bitcoin still has a lot higher to run. For example, Cathie Wood of Ark Invest has been steadily ratcheting up her price target for Bitcoin. Back in 2023, she suggested that Bitcoin might hit a price of $1 million by the year 2030. She then updated that to a price of $1.5 million, before raising it again to a price of $3.8 million. Given Bitcoin's current price of $101,000, that would represent a gain of more than 3,600%!
And Wood is hardly alone in calling for a major rally in Bitcoin's price. Now that Bitcoin has become the centerpiece of the Trump administration's pro-crypto policy agenda, there's reason to think that Bitcoin could hit $1 million much sooner than anyone thought. There's even talk that the creation of a new strategic Bitcoin reserve by the U.S. government could lead to a worldwide Bitcoin arms race, as nations race to scoop up as much Bitcoin as they can.
Bitcoin as a risk-off asset
But it's not just the upside potential of Bitcoin that is attracting investors. In certain investment circles, Bitcoin has acquired the cachet of being digital gold. Just like physical gold, Bitcoin can act as a long-term store of value and a hedge against economic uncertainty.
Image source: Getty Images.
Speaking at this year's World Economic Forum in Switzerland, Larry Fink, chief executive officer of BlackRock (BLK +0.13%) -- the company that created the iShares Bitcoin Trust ETF -- highlighted that large institutional investors view Bitcoin as a possible hedge against geopolitical instability, currency debasement, and out-of-control hyperinflation. As a result, many institutional investors are adding to their positions in Bitcoin because they are trying to insulate themselves against the worst possible economic scenario.
And that's what differentiates Bitcoin from Nvidia. Yes, both assets can skyrocket in value when the economy is going gangbusters, and the outlook is bullish for the tech sector. But what about when dark clouds appear on the economic horizon, or when there is the risk of a geopolitical conflict breaking out in the world? That's exactly when Bitcoin can become the ultimate hedge.
This is an aspect of Bitcoin that BlackRock has highlighted extensively to investors. In September, for example, BlackRock released a comprehensive report on the risk-reward features of Bitcoin. In it, BlackRock highlighted Bitcoin's unique diversification properties.
Is there room for both in your portfolio?
This might sound like an argument for selling your Nvidia shares and going all-in on Bitcoin. But it's not. There's room for both in your portfolio. We're seeing that with top billionaire hedge fund managers. They are simply scaling back their positions in Nvidia after some outsize gains.
Englander, for example, still owns more than 11 million shares of Nvidia, while Huo owns 4.32 million shares. And Nvidia is still a top 10 holding for both.
How much Bitcoin belongs in your portfolio really depends on your long-term outlook. As for me, I'm convinced that Bitcoin is going to play an increasingly important role in the global financial system. And I'm also bullish that Trump's pro-Bitcoin stance is going to lead to rapid price appreciation during the next four years.
