Bitcoin still has more upside potential than any tech stock, and that includes Nvidia

It’s hard to beat the growth potential of Nvidia (NVDA -1.59%)which Goldman Sachs recently called “the most important stock on planet earth”. A $1,000 investment made just five years ago would be worth more than $26,000 today.

Nvidia now boasts a colossal market cap of nearly $3 trillion and is poised for years of impressive earnings thanks to growth opportunities in artificial intelligence (AI).

But don’t forget about Bitcoin (BTC -1.03%)which has as much — and possibly more — upside potential as Nvidia. And while it might seem counterintuitive, an investment in Bitcoin can actually be less risky than many people think.

Potentially positive

Of course, Nvidia has overtaken Bitcoin this year, and it’s not even close. In 2024, Nvidia is up about 130%, while Bitcoin is up only 40%. Furthermore, Nvidia has outperformed Bitcoin over the past 12 months, 18 months and 24 months. Over the past two years, Nvidia has risen 764% compared to just 209% for Bitcoin. So it’s time to forget about Bitcoin and go all-in on Nvidia, right?

Bitcoin/US Dollar Chart from TradingView

Wrong. And that’s because stocks aren’t valued based on how they’ve performed in the past, but rather how they’ll perform in the future. And this is where Bitcoin’s growth potential is so impressive. Simply put, the further you extend your price forecast into the future, the better Bitcoin looks.

For example, the investment firm Bernstein believes that the price of Bitcoin could more than triple to reach $200,000 by the end of 2025. A growing number of Silicon Valley tech leaders believe that Bitcoin could reach a price of $1 million in the next few years , and Cathie Wood of Ark Invest believes that Bitcoin could reach a price of $3.8 million by 2030.

But all these price predictions pale in comparison to those made by Michael Saylor, founder and executive chairman of MicroStrategy. He believes Bitcoin could reach $13 million by the year 2045. He is convinced that Bitcoin is the future of money and has the potential to replace the US dollar. You may not agree, but that’s what makes the markets.

Based on today’s Bitcoin price of around $60,000, a price of $13 million represents a gain of over 21,000%. Can you find any Wall Street analysts willing to make the same prediction for Nvidia?

Risk and volatility

Of course, Bitcoin’s enormous growth potential comes with significant risk. The US government could ban Bitcoin, as other governments have done. US tax authorities could make it extremely burdensome to hold Bitcoin for the long term if they require investors to pay taxes on unrealized capital gains. And the Securities and Exchange Commission could move to classify Bitcoin as a security, creating an immediate existential risk.

But it’s not like Nvidia doesn’t come with its own share of risks. The AI ​​boom could turn out to be a huge speculative bubble, with some already comparing it to the dot-com bubble of the 2000s. And it’s not like Nvidia doesn’t have its share of competing rivals, any of which could snatch market share. Nvidia may never be able to satisfy Wall Street’s insatiable appetite for growth.

Image source: Getty Images.

Thus, a better way to compare Bitcoin to Nvidia directly probably involves a comparison of risk-adjusted returns. In other words, how much risk are you taking on to get all that growth potential? In the best of worlds, you would choose the investment that offers the greatest possible upside while taking on as little risk as possible.

And this is where things get really interesting, because on a risk-adjusted basis, Bitcoin may not be as risky as you think. According to Fidelity Investments, at the start of 2024, Bitcoin had the highest Sharpe ratio (which measures risk-adjusted returns) of any asset class in the past five years. This means that even though you are taking a huge risk with Bitcoin, you are getting paid for it.

Bitcoin or Nvidia?

If forced to choose between Bitcoin and Nvidia, I would choose Bitcoin. It’s hard to ignore the fact that it has been among the world’s best-performing assets for so long. And thanks to the launch of new Bitcoin exchange-traded funds (ETFs) in sight in January, Bitcoin looks set to finally join the mainstream. You no longer have to be a crypto enthusiast to buy Bitcoin; you can buy it just as easily as your favorite tech stock.

And while the million dollar price predictions for Bitcoin might seem a bit outlandish to many, they certainly demonstrate how much potential this cryptocurrency has. Over almost any time horizon, it has more upside potential than any tech stock.