How Nvidia, Square & PayPal Stocks Are Benefiting From Soaring Bitcoin Prices

December 4th, 2020 by Trefis Team
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Bitcoin prices have surged by over 160% year-to-date, driven by multiple factors including higher institutional interest, fintech companies Paypal and Square’s moves into the crypto space, and also by a view that scarce digital currency could be a hedge against inflation and a weakening U.S. dollar. Our indicative theme on Cryptocurrency Stocks – which includes semiconductor, payments, and brokerage companies that have some exposure to the cryptocurrency space – is up a solid 110% year-to-date, compared to the S&P 500 which is up by just about 14% over the same period. Key stocks in our theme include Square (SQ), PayPal Holdings (PYPL), Nvidia (NVDA), and CME Group (CME).

Although crypto likely represents a small portion of these company’s revenues at the moment, it does have the potential to be big. For example, Payment apps Square and PayPal, who make money by buying bitcoin from brokers and selling them to their customers by adding a “spread” stand to benefit as prices and volumes rise. Square’s Cash App generated about $1.63 billion in Bitcoin-related sales in Q3 2020, an 11x jump year-over-year. Similarly, Nvidia (NVDA) also benefits from demand for its top-of-the-line GPUs such as the Ampere lineup from cryptocurrency miners.

[Updated 10/29/2020] Cryptocurrency Stocks To Watch

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Interest in cryptocurrency is surging once again with Bitcoin prices up by almost 30% over the last month, driven by growing institutional interest and Paypal’s recent move to allow its customers to buy and sell certain cryptocurrencies.  Our indicative theme on Cryptocurrency Stocks – which includes semiconductor, payments, and brokerage companies that have some exposure to the cryptocurrency space – is up 88% year-to-date, compared to the S&P 500 which is up by just about 5% over the same period. This theme could be of interest to investors who are looking for upside from cryptocurrency adoption and prices, but want to avoid buying into the currencies themselves considering the volatility, risk of fraud, or cyber theft, or potential portfolio mandates. Below is a bit more about the stocks in our theme and how they have fared this year.

Square (SQ) cash mobile wallet app has emerged as a very popular way for people to buy and sell Bitcoin. The stock has gained a whopping 183% year-to-date, as investors bet that Square’s digital payment solutions will continue to gain traction through and post Covid-19. The stock has dropped by about -9% over the last 5 trading days, however.

Nvidia (NVDA) a semiconductor company that is best known for its graphic processing units (GPU) which are increasingly used in machine learning and AI, is also finding application in bitcoin mining. The stock has gained over 131% year to date although it declined by about -3% over the last week.

PayPal (PYPL) a large online payments processor, has indicated that it would allow customers to buy, hold, and sell cryptocurrencies such as Bitcoin and Ethereum directly within its PayPal and Venmo app. The stock is up by 88% this year and was down by about -1% over the last 5 trading days.

Advanced Micro Devices (AMD) is a semiconductor major that makes CPUs and GPUs, which are increasingly used in bitcoin mining. The stock has gained about 79% year-to-date and remained largely flat over the last 5 trading days.

CME Group (CME) the world’s largest financial derivatives exchange, also offers bitcoin futures contracts. The stock is down by about -18% year-to-date and declined by about -2% over the last week.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio to beat the market, with over 120% return since 2016, versus about 60% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.

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