Buy Bitcoin or buy Nvidia?

Author: Zhu Weisha

On March 14, a reader asked me how I viewed Nvidia's sharp drop on March 11, and whether to buy Bitcoin or Nvidia.

I have researched Bitcoin, but not Nvidia, so I hastily looked for information on Nvidia. Therefore, my research on Nvidia is not sufficient. As the leader of this round of US stock market rise, it has driven the rise of the Nasdaq. Will it continue to lead this year? The question of whether to buy Bitcoin or Nvidia is actually asking who will be the leader of the Nasdaq in 2024.

Based on Nvidia's own data calculations

Nvidia believes that in the future years of 2024 and 2025, semiconductor supply will not meet demand, and Nvidia's expected performance is good. The guidance for the first quarter of 2024 is $24 billion, an increase of 8.5% from the previous quarter.

Based on this, the forecast for the entire year of 2024 is around $110 billion. Using its price-to-sales ratio at the end of 2023, which is total market value divided by total revenue, $1.2645 trillion divided by $60.9 billion gives a price-to-sales ratio of about 21 times. If it remains unchanged, the market value in 2024 could reach around $2.31 trillion. On March 15, Nvidia reached $2.2 trillion, leaving a 5% upside potential. At this point, it is not far from peaking, and long-term funds may exit early. The usual practice of long-term funds is not to take the last bite; once they exit, they will not re-enter in the short term, disrupting the short-term balance of funds, and short-term funds will be unable to push the price up, resulting in a double-top pattern.

At that time, some estimated that the price-to-sales ratio would rise to 25 times in January 2024, which would mean that the market value for the entire year would reach $2.75 trillion, leaving a 25% upside potential. An increase in the price-to-sales ratio indicates that the performance in 2024 needs to grow even faster than in 2023, requiring a strong performance in the first quarter financial report. Currently, there is no news. The market is showing divergence, which can also explain why the market is hesitant to rise. This is the reason for the sharp drop on March 11, and below $1,000, a double-top may have formed, which is a very bad sign of a peak. If the double-top is confirmed, there will be a significant adjustment. Below is the annual chart of Nvidia.

Figure 1

Jensen Huang's view of competitors

Companies have competitors, and Nvidia's captain Jensen Huang views competition as follows: Almost all major companies in the world are doing internal development. Google, AWS, Microsoft, and Meta are all making their own chips. Nvidia's GPUs are being focused on because they are the only platform open to everyone. A unified architecture covers all fields. Our CUDA architecture can adapt to any emerging architectural model, whether it is CNN, RNN, LSTM, or the current Transformer. Now, various different architectures such as Vision Transformer and Birdseye View Transformers are being created, and all these different architectures can be developed on Nvidia GPUs.

Mr. Huang means they have a competitive advantage.

How does Jensen Huang view the entire industry?

Jensen Huang stated that accelerated computing and generative artificial intelligence have reached a "tipping point."

With revenue and profits hitting record highs for three consecutive quarters, the fourth quarter performance and first quarter guidance exceeded analysts' expectations, leading to Nvidia's stock price surging over 10% in after-hours trading.

As an upstream supplier, Nvidia's orders mainly come from downstream manufacturers, and these manufacturers' revenues mainly come from end users. We see that this year, almost all related applications have added intelligent assistants, but how many are truly useful? They are still in the "smart but useless assistant" stage. Looking at what others have made is very beautiful, but we just can't get our hands on it; I think most users feel this way. The end market is still a niche market, unable to support the massive investment in artificial intelligence. Accelerated computing chips used for AI servers, I don't understand, but generative AI is the "tipping point" of technology, and the market's "tipping point" has certainly not been reached.

Cathie Wood and Jensen Huang have different views:

Famous fund manager Cathie Wood invested in Bitcoin in 2015, and two years later, before the coin surged to nearly $20,000, she nearly completely divested her funds' holdings in Bitcoin. Cathie Wood had already bought Nvidia back in 2014 but had basically cleared her position before the big surge. Her foresight was well-timed.

She believes that the GPU shortage exacerbated by the popularity of AI tools like ChatGPT last year has now begun to ease. She pointed out that GPU delivery times are shortening, especially for Nvidia, which has decreased from 8 to 11 months to about 3 to 4 months.

Understanding the future development of artificial intelligence is key to Nvidia's valuation

Despite the hype, artificial intelligence is still in the conceptual product stage. Projects from manufacturers (B-end) are far less popular than the internet and blockchain were back in their heyday, so there is no massive bubble like before. For end users (C-end), there are not many applications that the public can easily use. How will it develop in the future? Nvidia's annual Global Developer Conference (GTC) will be held on March 19, which is regarded as a grand event in the entire AI and deep learning field. According to convention, the company will complete important product or technology releases at the conference. After watching the conference, we will know how the future looks.

Can Nvidia reach $3 trillion?

Based on the price of $879 on March 14, reaching $3 trillion would require a 36% increase. Nvidia's rise is due to artificial intelligence, but AI has not yet produced widely adopted applications like computers and smartphones. Nvidia's valuation is based on performance, not on a bubble; artificial intelligence has not yet reached a frenzied level of application, and the profit model is not clear, which poses a requirement for value correction that will affect upstream supplier Nvidia. Currently, some predict that Nvidia could reach a market value of $4 trillion, but unless artificial intelligence experiences explosive growth, this is unlikely. $3 trillion is already a very high annual target.

In summary

Although Nvidia has a competitive advantage in the industry, AI applications have not yet reached the market's tipping point; GPU delivery times are shortening, indicating a gradual balance between supply and demand for Nvidia products; artificial intelligence is still in the conceptual product stage, representing a technological "tipping point," and the profit model is not clear. We look forward to breakthroughs in practical new AI products. With the boom in artificial intelligence, Nvidia is also booming.

In the trillion-dollar club, Nvidia remains the most dazzling presence. A 36% increase in the next nine months is not much; buying Nvidia is about valuing its low risk and high return, while Bitcoin, which has just entered the trillion-dollar club, may surpass it. As a long-term investment, Bitcoin has lower risk and higher returns.

Bitcoin has low risk and high returns

I am a big friend of Bitcoin, from ignorance to belief, and then to adding value to it. Having a stance will lead to bias; the decision is still yours.

The approval of the Bitcoin spot ETF by the US means that Bitcoin has broken out of its niche and is moving towards the mainstream. All the rules of Bitcoin have changed. Clinging to old rules will lead to severe losses, akin to being like Laszlo Hanyecz, who got up early but missed the boat. These articles help group friends clarify their thoughts from different angles: "How high can Bitcoin rise after the US approves the ETF?", "Why is the Bitcoin ETF the best financial product?", "What is the basis for Bitcoin rising to $3.3 trillion?", "How to value Bitcoin?", "JPMorgan's view that Bitcoin has 'already surpassed' gold is untenable," "Behind the scenes of the SEC's approval of the Bitcoin ETF" (chainless.hk). Here are the conclusions directly quoted.

Compared to Nvidia:

Bitcoin, as a cryptocurrency, does not rely on company performance for its value, so it cannot be directly compared to Nvidia's performance;

The competition in the crypto space has been completed, and Bitcoin firmly holds the number one position;

Bitcoin has no ceiling;

Bitcoin is a mature product; if you can trade stocks, you can operate it, which is easier than artificial intelligence;

Bitcoin can be traded globally, not limited to specific exchanges, thus its potential customer base is much larger;

Bitcoin can be traded 24/7, while Nvidia's stock trading is subject to exchange time restrictions;

Bitcoin is demand-driven valuation, solely dependent on the comparison of bullish and bearish forces;

To study the comparison of bullish and bearish forces, one must observe the inflow of funds into the spot ETF and the changes in data for one-year holdings;

Bitcoin has just been recognized by the capital market, in its early stages, akin to the launch of ChatGPT on November 30, 2022. At that time, Nvidia was $165. By November 2023, it rose to $460, an increase of 2.78 times.

If we expect Nvidia's market value to reach $3 trillion, dividing by the total number of shares, 2.464 billion shares, gives a price of $1,217 per share, over a period of two years and one month, an increase of 7.37 times.

The approval of the Bitcoin spot ETF is on January 10, 2024, with a coin price of $44,670, trading on Nasdaq, with conditions superior to Nvidia in all aspects, and technically there is no double-top, so it is unreasonable for its increase to be lower than Nvidia's. Using Nvidia's increase of 2.78 times multiplied by Bitcoin's price of $44,670 on January 10, Bitcoin's price by December 10, 2024, would be $124,200. On March 16, 2024, the price was $69,000, leaving an 80% upside potential. Of course, calculating Bitcoin's market value using Nvidia's data is an undervaluation.

Bitcoin's first target is $3.3 trillion

The meaning of the first target is that Bitcoin, as a store of value, holds the second position, with gold being the first. This position is based on the four-year cycle from the lowest to the highest position, where there is a pattern of tenfold increase, from the lowest point of $16,000 before halving to the highest point after halving being a tenfold increase, making each Bitcoin worth $160,000, multiplied by 21 million, equals $3.3 trillion. After the ETF, the tenfold cycle should be broken, and it should only go higher.

A suggestion to buy Bitcoin and sell Nvidia

A professional investor friend in my group gave the following advice:

Nvidia is high and cold. Consider taking profits on part of your position and reallocating to Bitcoin or looking at US stocks directly related to Bitcoin's value, such as MicroStrategy (MSTR.Nasdaq) and Hong Kong stocks like "MicroStrategy" BoYa Interactive (434.hk), holding them for appreciation; the time freed up can be used to participate in the promotion of David Coin DW20, earning more DW coins.

David Coin DW20 and the Hal Finney Hypothesis

Gold is worth $13.7 trillion, and if Bitcoin rises further and surpasses gold, a new narrative or demand factor is needed, which means the realization of a Bitcoin standard. This is based on the Hal Finney Hypothesis.

Last March, I introduced the idea of "Bringing out Satoshi Nakamoto to welcome the new era" on Hong Kong's Sunshine TV, already sensing the arrival of a new era for Bitcoin. Marked by the launch of the Bitcoin spot ETF, as I envisioned, Bitcoin has entered the second half. The store of value will allow financial experts to achieve excellence, but there is still a need for the expansion of specific applications for Bitcoin. In this regard, one of Bitcoin's founders, Hal Finney, commented on Bitcoin two days after its launch:

"If Bitcoin succeeds and becomes the world's main payment system, the total value of money should equal the world's wealth. Currently, based on estimates of the total number of households globally, I find the range of wealth varies from $100 trillion to $300 trillion. Corresponding to 20 million Bitcoins, the value of each coin would be about $1 million."

Hal Finney's vision requires Bitcoin not only to succeed but also to become the main payment system. Bitcoin has already succeeded; whether it can take over the heat of AI in the future depends on Bitcoin's application—becoming the world's main payment system.

The idea of DW20 Bitcoin standard that I designed comes from Hal Finney's vision, implying that Bitcoin standard becomes the main payment system. This idea has already taken shape in 2023. Simply put, it is about providing Bitcoin with the scale it lacks, using Bitcoin to measure global economic development, replacing stablecoins with David Coin (DW20) for daily transactions. Together, Bitcoin and David Coin (DW20) form a non-inflationary Bitcoin standard system. If realized, the price increase could be as Hal Finney predicted, perhaps making Bitcoin extremely popular.

The issuance principle of David Coin (DW20) is the same as Bitcoin, belonging to consensus currency, and also requires a growth process from air to asset coin (stablecoin). The difference is that David Coin (DW20) adopts an unconditional airdrop method, allowing anyone to register and receive free airdrops. The process from air to asset is a process of huge profits, allowing us to ride the Bitcoin wave with David Coin while supporting Bitcoin. Currently, David Coin is like early Bitcoin; only early participation makes it easy to profit. The earlier you register, the more likely you are to achieve a leap in social class. The era of huge profits in Bitcoin has already been missed; do not miss David Coin (DW20) again, give yourself a chance to get rich, and claim the airdrop at zero cost!

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For articles related to the Bitcoin standard, readers can visit the Chainless official website (chainless.hk) to read.

Buy Bitcoin or buy Nvidia

Bitcoin and Nvidia are not comparable; one looks at consensus value, while the other looks at performance value. However, recently, due to both being prominent in the investment market, it has led people to consider them as a choice between the two or to compare their future values. As investment products, one looks at the extent of future consensus expansion, while the other looks at future performance breakthroughs and its position in the industry. If one must say there is comparability, it is due to the launch of the Bitcoin spot ETF. The future value of Bitcoin, in addition to the consensus mechanism, is now endowed with the characteristics of stocks due to the spot ETF, requiring Bitcoin to break through its original store of value consensus, focusing on applications, which means realizing Hal Finney's idea of becoming the "main payment system," showcasing the "future prospects" required by the stock market, in order to meet the appetite of the capital market and become the long-term leader of the stock market.

Nvidia was booming a few years ago mainly due to its GPUs dominating the market, including extensive use in the Ethereum mining industry. Starting in 2023, it surged again due to the rise of AI computing power, leading to Nvidia's stock price soaring, making its market value the third largest after Microsoft and Apple, approaching $2 trillion. However, the future of Nvidia's stock price and market value depends on its company's innovation and sustained leading position in the industry.

Returning to the current stage of investment, whether to buy Bitcoin or Nvidia depends on personal investment preferences and styles. Purely from the perspective of future profitability, if one adheres to long-term value investment and has a strong tolerance for volatility, Bitcoin is more promising. Of course, it does not rule out that after the spot ETF, Bitcoin's characteristics may change. According to the current view of the US SEC, Bitcoin is still defined as a speculative asset. The capital market is forcing Bitcoin to change its characteristics.

For conservative investors, Nvidia may be more ideal, as its performance is predictable and has a higher degree of certainty. However, any stock investment in the secondary market does not solely depend on the absolute value of the company's performance; it is more about the expected growth of its performance and the influence of various other factors, and it has its performance ceiling, which Bitcoin does not have.

Conclusion:

For conservative investors, wait for Nvidia's stock price to adjust and look forward to future entry at the right time, while for long-term holders, Bitcoin is a better choice, as Bitcoin is certain to rise.