In the fourth quarter, several prominent hedge fund managers sold Nvidia (NVDA +0.29%) and bought the iShares Bitcoin Trust (IBIT +0.07%), an exchange-traded fund issued by BlackRock that tracks the price of Bitcoin.
- Israel Englander of Millennium Management sold 1.1 million shares of Nvidia, reducing his stake by 10%. He also added 6.3 million shares of the iShares Bitcoin Trust, which now ranks as his third largest position excluding options contracts.
- Ken Griffin of Citadel Advisors sold 3.9 million shares of Nvidia, reducing his stake by 56%. He also added 1 million share of the iShares Bitcoin Trust, though it remains a relatively small position in his portfolio.
- David Shaw at D. E. Shaw sold 6.9 million shares of Nvidia, reducing his stake by 41%. Shaw also added 7.4 million shares of the iShares Bitcoin Trust, which now ranks among his 25 largest positions excluding options contracts.
The three billionaires mentioned above manage the three most successful hedge funds in history in terms of net gains since inception, according to LCH Investments. That makes them good sources of inspiration. Here's what investors should know about Nvidia and the iShares Bitcoin Trust.
NASDAQ: NVDA
Key Data Points
1. Nvidia
Nvidia reported excellent fourth-quarter financial results, beating expectations on the top and bottom lines. Revenue increased 78% to $39.3 billion on particularly strong growth in data center sales, and non-GAAP net income increased 71% to $0.89 per diluted share. The company also provided first-quarter guidance that exceeded estimates.
However, the stock has fallen about 10% since the report. One cause for the decline may be the 3-percentage point contraction in gross margin in the fourth quarter, which suggests Nvidia has lost some pricing power. But Stifel analyst Ruben Roy thinks that number will rebound as Nvidia sells more of its next-generation Blackwell graphics processing units (GPUs).
The investment thesis for Nvidia is solid. Its GPUs are the leading artificial intelligence (AI) accelerators. And competing with the company is difficult due to its CUDA platform, software development tools that include 300 code libraries and 600 pretrained AI models. CUDA helps programmers write AI applications across disciplines ranging from healthcare and retail to autonomous robots and self-driving cars.
Wall Street expects Nvidia's adjusted earnings to increase 50% in fiscal 2026, which ends in January 2026. That makes the current valuation of 40 times adjusted earnings look downright cheap. So, why were certain hedge fund managers selling Nvidia in the fourth quarter? I suspect it was more about portfolio diversification than lost confidence in the company. Regardless, patient investors should consider buying a small position today.
NASDAQ: IBIT
Key Data Points
2. The iShares Bitcoin Trust
Bitcoin has advanced 35% over the past year to $84,000, but several Wall Street experts expect tremendous price appreciation in the coming years, as detailed below:
- Ark Invest CEO Cathie Wood thinks Bitcoin could hit $3.8 million by 2030, which implies about 4,420% upside from its current price.
- Gautam Chhugani at AllianceBernstein thinks Bitcoin could reach $1 million by 2033, which implies about 1,090% upside from its current price.
- Strategy Executive Chairman Michael Saylor expects Bitcoin to reach $13 million by 2045, which implies about 15,375% upside from its current price.
Personally, I think those forecasts are very aggressive, but I do see three catalysts that could make Bitcoin more valuable in the coming years: adoption of spot Bitcoin ETFs, the periodic halving of Bitcoin mining subsidies, and the possible creation of a national digital asset stockpile.
Spot Bitcoin ETFs reduce friction by providing Bitcoin exposure without the hassle and high fees associated with cryptocurrency exchanges. Consequently, those funds are creating demand by drawing more investors to the market. The iShares Bitcoin ETF was the most successful ETF launch in history in terms of net inflows during its first year on the market, according to The Wall Street Journal.
Bitcoin is created and awarded to miners that add new transaction blocks to the blockchain, which involves solving complex cryptographic puzzles. However the Bitcoin subsidies awarded to miners are cut in half every 210,000 blocks, which limits the supply of Bitcoin to 21 million coins. The economic law of supply and demand says any asset with a fixed supply will become more valuable as demand increases.
President Donald Trump in January signed an executive order that tasked a working group with evaluating the creation and maintenance of a national digital asset stockpile. If such a stockpile is created, it would likely position the government as a buyer of Bitcoin. That would increase demand for cryptocurrency and help push its price higher.
Importantly, while the tailwinds discussed could make Bitcoin more valuable in the long run, history says it will be a very bumpy ride. Bitcoin has fallen 20% since mid-January, and it has dropped more than 50% from a record high three times in the last six years. Only investors comfortable with that type of volatility should consider buying a position in the iShares Bitcoin Trust.
