Will Warren Buffett and Berkshire Hathaway Start to Invest More in Tech?

By Frank Corva

Warren Buffett is well-known for being a value investor. Value investing refers to purchasing stocks or businesses that appear to be trading for less than their intrinsic value.

If you look through the portfolio of Buffett’s holding company, Berkshire Hathaway, you’ll see that he’s found value in financial, consumer staple and energy stocks in recent years, as the portfolio is dominated by these types of equities.

However, there’s one stock that stands out in Berkshire’s portfolio: Apple (AAPL).

Apple now comprises over 46% of Berkshire Hathaway’s portfolio.

While this might prompt you to run out and buy shares of AAPL, keep in mind that Berkshire first bought the stock at about $23 per share back in Q1 of 2016. As of May 10, 2023, AAPL trades at about $174 per share.

If you were to take the value investing approach to buying AAPL, you might consider buying the stock if its price were to dip considerably. It’s currently trading near its all-time high and is potentially overvalued.

But back to Buffett and Berkshire.

Buffett believes that Apple is the best company in Berkshire’s portfolio.

It’s a bit strange to hear Buffett speak so highly of AAPL — a tech stock — because 1) it wasn’t him that bought AAPL back in 2016; it was one of his lieutenants, and 2) he’s admitted to missing many a tech stock boat in his career.

Buffett’s big misses on tech stocks and technology plays

While Buffett — the “Oracle of Omaha” — surely has an extensive track record of picking the right stocks at the right prices, very few of those stocks have been tech stocks.

The following are a few of Buffett’s big misses when it comes to tech plays:

Microsoft (MSFT): Despite being close friends with Microsoft’s founder Bill Gates, Buffett never took a position in the company. He primarily attributes this to “stupidity,” as he puts it. However, he also acknowledges that his friendship with Gates may have put Gates in a position where he could have been accused of sharing inside information with Buffett, and Buffett didn’t want to create such a scenario.

Amazon (AMZN): Berkshire Hathaway only began buying Amazon stock in 2019 — 22 years after the company IPO’d — and it wasn’t Buffett that called for the purchase; it was one of his deputies. Buffett calls himself an “idiot” (This guy sure is hard on himself, huh?) for not getting in sooner.

Alphabet (GOOGL): Google is another big tech play that Berkshire missed. In reflecting on this miss, though, it was Buffett’s partner Charlie Munger who verbally flogged himself. “I feel like a horse’s ass for not identifying Google,” said Munger back in 2020.

Bitcoin (BTC): Buffett still doesn’t believe in Bitcoin despite its meteoric rise in price over the past 13 years. He actually refers to the asset as “rat poisoned squared.” I guess he’ll just have to have fun staying poor rich investing in other assets. 

Buffett’s change in tone regarding tech

At Berkshire Hathaway’s most recent annual shareholder meeting, which took place last weekend, Buffett called Elon Musk, CEO of Tesla, SpaceX and Twitter, a “brilliant, brilliant guy.” 

Does this mean Berkshire will take a position in Tesla (TSLA)? Maybe.

Musk pointed out on Twitter that Berkshire would have been up big on its TSLA holdings had it bought when Musk and Munger had lunch together in late 2008. 

It could be that Buffett and the team at Berkshire are waiting for a dip in the price of TSLA to take a position, though it would be surprising to see them take a Cathie Wood-sized position in the company. 

Buffett also commented on artificial intelligence (AI) at Berkshire’s annual shareholder event last weekend.

He said that AI may change the world, and he had a chance to try out Microsoft’s ChatGPT with his friend Bill Gates a few months back.

However, he’s also skeptical of the technology, as he compared it to the atomic bomb in that we could lose control of it and that we don’t have the power to un-invent it. 

And Munger said he’s “personally skeptical of some of the hype that is going into artificial intelligence” and that “old-fashioned intelligence works pretty well.” 

So, while Berkshire’s betting on TSLA doesn’t seem to be out of the question, it seems the institution is still a ways off from investing in AI companies.

Berkshire beyond Buffett

While Buffett, 92, has no plans to retire, he has already appointed his successor, Greg Abel.

Abel is the chairman of Berkshire Hathaway Energy and doesn’t seem to have much experience investing in technology outside of the tech used in alternative energy production. 

Therefore, if Berkshire is to take some chances on finding value in technology companies, it may have to rely on the types of voices within the firm that recommended buying AAPL and AMZN. 

Time will tell as to whether this becomes part of Berkshire’s approach to value investing.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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