Interest in cryptocurrencies has been rising this year. Bitcoin has more than doubled in value as the stock market has struggled, with investors appearing to gravitate to the digital currency in the wake of economic uncertainty. Much of its recent momentum has been attributed to the belief that a Bitcoin-based exchange-traded fund may soon be allowed to launch, which could increase institutional investment in the token — and demand for it.
But Bitcoin remains a volatile and risky investment. For investors who want the best of both worlds — to gain exposure to crypto without taking on an excessive amount of risk — the better course of action may be to invest in the following three stocks: Nvidia (NVDA 0.45%), Mastercard (MA 0.70%), and Block (SQ 3.09%).
Nvidia’s business is booming now thanks to artificial intelligence (AI). But people are not only using its chips to provide the computing power needed by new AI-powered products and services. They’re also using them to mine cryptocurrencies, including Bitcoin. With AI being incredibly popular and interest in crypto potentially taking off, demand for Nvidia’s chips could soar even higher.
The business has already been doing exceptionally well. Through the six months ending July 30, the tech company’s revenues rose 38% year over year to $20.7 billion. And the bottom line was even more impressive, more than tripling to $8.2 billion.
Nvidia’s market cap is now more than $1.1 trillion, trading at more than 100 times earnings. It isn’t cheap, but with so much growth potential for the business from both AI and crypto, it wouldn’t be surprising to see the company continue to deliver strong results for the foreseeable future.
A more conservative investment play related to crypto is Mastercard. The payments network giant has been showing a significant interest in crypto. It offers crypto consulting services and has various types of cards that can appeal to crypto investors, including one that allows users to earn crypto rewards.
Mastercard is also working on developing a multitoken network that will help provide added safety to blockchain ecosystems, and make them more scalable in the process. The company sees significant demand here. Management says that according to a survey, close to half of its consumers around the world would either consider buying crypto or have already done so.
Investing in Mastercard is one of the safer ways you can obtain exposure to crypto. The company generates profit margins above 40% and it trades at a more reasonable earnings multiple of 34.
The fintech known as Block is more deeply entrenched in crypto. It’s such a big part of its business that it even breaks out Bitcoin revenue on its financial reports. Over the past three quarters, Bitcoin revenue of just under $7 billion accounted for 43% of Block’s top line. Block’s other transaction-based revenue contributed $4.7 billion, and its subscription and service-based revenue came in at $4.3 billion.
If there’s an uptick in Bitcoin trading activity, Block will be sure to benefit from it. The company’s Cash App gives consumers an easy way to buy, sell, and transfer crypto. It also makes investing in Bitcoin easy, offering to automatically invest a percentage of every direct deposit a user receives into the digital currency.
Block has posted losses totaling $282 million over the trailing four quarters, so it is the riskiest stock on this list. But in previous years, it has been profitable. And on an adjusted basis, it did post a profit of $0.55 per share in the third quarter, topping Wall Street’s estimates of $0.47 per share.
For investors who want deeper exposure to Bitcoin, Block may be the best option, but it does come with more risk than the other stocks listed here.
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Block, Mastercard, and Nvidia. The Motley Fool recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.