Key Takeaways
- Warren Buffett's Berkshire Hathaway as of the end of 2023 had no stake in Nvidia, a company at the center of rising investor enthusiasm about growth opportunities related to artificial intelligence.
- Berkshire Hathaway has traditionally not been a big fan of investing in technology companies, preferring companies that have easier-to-understand businesses.
- Berkshire invested in Apple in 2016 and Amazon in 2019, long after shares in those companies had experienced significant gains.
- Nvidia shares have gained 250% over the past year as the company has repeatedly exceeded growth expectations. The company's market capitalization has surged above $2 trillion, making it just the fourth U.S. company to reach that level.
Why doesn’t Warren Buffett, who many consider to be the smartest investor in the world, own a stake in Nvidia Corp. (NVDA)? After all, Goldman Sachs traders recently referred to it as “the most important stock on planet earth.”
It’s likely because taking a position in the chipmaker—despite blockbuster growth fueled by excitement surrounding opportunities tied to artificial intelligence—would go against the fundamental principles of investing that the chief executive officer of Berkshire Hathaway espouses.
Buffett is known to be a value investor, not big on newcomers and focused on simple and easy-to-understand businesses, like Coca-Cola (KO) and American Express (AXP). He looks for securities with prices that are low based on intrinsic worth, and focuses on companies as a whole rather than the whims of the market. He has said he generally avoided tech stocks,and according to Berkshire's most recent 13F filing for the fourth quarter, the company held no stake in Nvidia.
Berkshire has, however, taken large positions in Apple (AAPL) and Amazon.com (AMZN) in recent years, well after those stocks had experienced enormous gains. In the case of Amazon, Buffett expressed regret for not taking an early stake, saying he failed to appreciate its potential and that it cost people at Berkshire a lot of money.
Might he similarly regret not getting in on Nvidia? The stock, which has gained 250% over the past year through the close of trading on March 1, has surged past $2 trillion in market capitalization, making it just the fourth U.S. company to reach that level.
Won't Rush Into "It" Stocks
Buffett famously doesn't rush into hot "it" stocks, so Nvidia wouldn't typically be his cup of tea, according to Wedbush Securities tech analyst Dan Ives.
"The value-centric model makes some of these AI names not in Warren's wheelhouse (for now)," Ives said. "But he will not miss the AI Revolution."
Ives noted that Buffett could be making his AI bets via Apple and other names.
In his annual letter to shareholders, released last Saturday, the Oracle of Omaha said Berkshire seeks “to own either all or a portion of businesses that enjoy good economics that are fundamental and enduring.”
With more than $167 billion in cash at its disposal, market watchers are wondering which companies would fall into that category. Buffett says the options are limited.
“There remain only a handful of companies in this country capable of truly moving the needle at Berkshire, and they have been endlessly picked over by us and by others. Some we can value; some we can’t. And, if we can, they have to be attractively priced,” Buffett wrote. He added that Berkshire has “no possibility of eye-popping performance” with investments.
Skepticism About AI
While Berkshire has shied away from tech investments over the years, it started buying Apple in 2016 and it has become its single-largest stock holding, at over 900 million shares at the end of the fourth quarter.
Berkshire first purchased shares in Amazon in 2019, months after Buffett’s former business partner Charlie Munger said he had never owned Amazon shares. Amazon has “always been too complicated and uncertain for my particular temperament, and I find other things to do that will work fine," said Munger, who passed away last November at 99.
As for the potential of AI, Munger said at Berkshire’s annual meeting last May he was “skeptical” about the hype surrounding AI. “I think old-fashioned intelligence works pretty well.”
Buffett said he had tried out AI chatbot ChatGPT and it did “remarkable things,” but noted he had concerns about the underlying technology.
“When something can do all kinds of things, I get a little bit worried because I know we won’t be able to un-invent it,” Buffett said at last year’s meeting, adding that new technology comes with unforeseen consequences.
UPDATE—March 1, 2024: This article has been updated with share price information and links to articles.
