Market Views: Will AI stocks or bitcoin dominate in 2024?
In 2024, both bitcoin and technology stocks with ties to artificial intelligence (AI) have experienced a significant surge in market values.
Most notably, Nvidia has witnessed a remarkable uptick, attributed to its production of specialised chips indispensable for AI development.
These chips facilitate the intense processing required for AI-driven applications, such as sophisticated chatbots.
The increasing involvement of major tech corporations in AI ventures—evidenced by the development of popular products like ChatGPT—has dramatically escalated the demand for such critical hardware.
Meanwhille, despite ongoing debates about its legitimacy and stability, bitcoin has set another all-time trading high in March as it topped the $73,000 level for the first time, bringing the world’s original cryptocurrency even closer to doubling in price in just the first few months of this year.
The current bullish sentiment in bitcoin comes as the UK’s Financial Conduct Authority, or FCA, has expressed a willingness consider the trading of bitcoin and ethereum based exchange-traded notes, otherwise known as ETNs, in the UK.
The world’s largest pension fund, Japan’s Government Pension Investment Fund (GPIF), also recently announced its interest to learn more about how to invest in “crypto-assets”, specifically naming bitcoin as the example.
AsianInvestor asked different participants what is likely to experience the highest price growth in percentage in 2024: AI-related stocks or bitcoin.
The following responses have been edited for clarity and brevity.
David Chao, global market strategist Asia Pacific (ex-Japan)
Invesco
Bitcoin prices have come off their highs as inflows into US spot Bitcoin ETFs have faltered. Inflows peaked at around $12.2 billion on March 15, but they have since shed $0.9 billion in five days.
But new factors, particularly sustained bitcoin ETF-driven buying and the upcoming “halving” in mid-April, may push prices beyond $75,000. Bitcoin has historically fared well after halving events – the last time a halving event occurred was in May 2020.
A year later, bitcoin more than trebled. Since the next halving is just around month away, this could mean that the rally may have room to extend further.
If accurate, this might suggest that flows momentum may improve in the near-term, which may help stabilise bitcoin prices and return them to an upward trend.
Beyond improving earnings momentum for both AI stocks and bitcoin, there is an enormous amount of money sitting on the sidelines.
As investors develop FOMO and rates start to decrease, some of this cash stockpile is likely to move into risk assets, sending AI stocks and other riskier assets such as EM equities and Bitcoin higher.
There is a historical basis for this thesis. Money market assets peaked in the fourth quarter of 2008 before dropping significantly. It seems no coincidence that cash moved off the sidelines just as risk assets began a strong and lengthy rally in March of 2009.
While Bitcoin has seen an overall positive trend since the ETF approvals in the US, investors should be prepared to stomach significantly higher volatility for the foreseeable future. Conversely, AI-related themes are shaping up to be a long-term market trend that could be a more sustainable option for future returns.
Eric Compton, director of equity research
Morningstar
Both asset classes, bitcoin and AI beneficiaries, have solid demand stories.
While we do not have an official fair value estimate for bitcoin, we agree that as it gains further institutional acceptance, it should create greater demand for the asset, and greater demand for an asset typically leads to a stronger market value.
On the AI front, there are so many different stocks that are beneficiaries, and the growth outlook remains exceptional.
On Nvidia specifically, we have a fair value estimate of $910 and we think shares are close to fairly valued, but we also assign shares a very high uncertainty rating because the growth outlook is so tough to predict.
We currently expect revenue growth of 91% in fiscal 2025, and EPS growth of over 100%, followed by EPS growth of 32% the following year.
These are amazing growth numbers, but admittedly Nvidia could outperform them, if for example demand for these chips exceeds our expectations and Nvidia is able to completely maintain its currently dominant share.
We do not like to try to time short term price movements, but we remain positive on the AI demand story, and also agree that Bitcoin is on a path towards greater institutional demand.
Duncan Moir, senior investment manager of alternatives
abrdn
The success of both AI stocks and Bitcoin is being driven by modern growth stories, and it’s tempting to compare.
Indeed, there are some parallels, considering that Nvidia benefits from a scarcity play of hardware needed to meet a rapidly increasing AI-related demand, while Bitcoin’s entire investment thesis rests on scarcity, and expected demand picked up off the back of spot ETFs in the US.
However, stronger parallels exist between Nvidia, whose impact will be far reaching through the different applications of AI, and the broader blockchain industry.
While bitcoin has just a single primary use case as a source of value, proof-of-stake blockchains (the most prominent being ethereum) are foundational technologies that can support a multitude of use cases across a wide range of sectors, including financial services, automobiles, retail, and healthcare.
The native digital assets of these blockchains provide investors with direct exposure to their future success, albeit with equal exposure to the undoubted future failure of some.
Although bitcoin is taking front-and-centre now, large enterprises are embedding proof-of-stake blockchains in their operations, the impact of which will be seen in the years to come.
As investors look to add AI-related stocks to their portfolios in 2024 and beyond, they should also turn their attention to the broader enterprise blockchain universe to ensure they have sufficient exposure to this nascent, but rapidly growing industry.
Raj Shant, managing director and client portfolio manager
PGIM Jennison Associates
AI is one of the major themes that we’re focusing on for our global equity opportunities strategy. We believe we are in the early stages of a generative AI–driven investment cycle that will sweep through the technology sector and, ultimately, the economy. The scope of this transformation can be extraordinary for companies, which will need to effectively incorporate generative AI into their business models to compete.
With few direct applications for AI today, most current AI investment is targeting the infrastructure side. We’re finding companies that present AI-related opportunities in semiconductors, capital equipment, chip design, certain software applications.
A tangible way to invest in generative AI today is through the semiconductors and infrastructure needed to support AI model training and running scaled AI-enabled applications.
Graphic processing units (GPUs) are the core technology, combining cutting-edge semiconductors and customized software to process multiple computations simultaneously.
The AI wave is also reaching the hyperscaler cloud vendors, who provide cloud computing infrastructure.
They are well positioned to meet growing demand for generative AI from medium-sized and smaller companies, who cannot afford to build, train, and operate their own models.
Bitcoin, like gold, generates no earnings or cash flow, and therefore no measurable value for the purchaser. Without any fundamentals to support them, we find it impossible to derive a fundamental value for either.
Richard Clode, portfolio manager on the global technology leaders team
Janus Henderson Investors
The market debate around dominant AI chipmaker Nvidia since the second half of 2023 has been more focused around the trajectory of growth in 2025 and beyond, rather than short-term news flow, such as its recent strong quarterly results, which included a 265% jump in quarterly revenue from a year earlier.
Nvidia has gone a long way to convince the market that the company’s stellar performance is not about to plateau anytime soon.
Key vectors to that statement include generational transitions in compute, the inflection in AI inferencing on top of training, the breadth of the customer base, ongoing supply constraints, their chip roadmap, and the potential to reignite a business in China.
Confidence in these growth vectors continues to drive up sell-side consensus estimates that have risen over 400% in the past year surpassing the commensurate rise in the share price, which has kept valuations in check.
Even with AI hype, unlike in 2020, with the return of the cost of capital the market is rewarding companies delivering strong fundamentals and we view share price performance supported by real profits and cashflow as much more sustainable.
Also, with the transition to proof of stake for ethereum as well the scale of the datacentre business now the company’s exposure to cryptocurrency is relatively small reducing volatility given crypto crashes in 2018 and 2022.
Jonathan Man, chief executive officer
Webull Singapore
Investor appetite for AI-related stocks will remain strong in 2024 as investors recognise the potential and true value of AI in transforming automation processes and its ability to scale operations for companies in various industries such as finance and healthcare sectors.
While investors have mostly focused on large cap companies, other smaller players in the AI ecosystem such as chip manufacturers, semiconductor producers, software developers and data centres are poised to benefit from the growing AI landscape.
For example, shares of smaller AI firms rallied after Nvidia, disclosed its stake in them, reflecting how large-cap companies can boost funding and drive investor interest in smaller cap companies.
Ultimately, these strategic investments and funding rounds will boost the overall AI ecosystem.
The rise of GenAI is also driving the growth of the cybersecurity market, as AI continues to be used by threat actors in increasingly sophisticated attacks.
Fortune Business Insights predicts this sector will reach $424.97 billion by 2030, nearly 2.5 times its 2023 valuation.
Particularly in this sector, it is the cybersecurity companies that can address AI threats or demonstrate successful integration of AI in their solution that will set themselves apart from competitors.