Buffett’s Berkshire Slashes Apple Stake by Nearly 50% Amid Valuation Concerns

Warren Buffett's Berkshire Hathaway significantly reduced its stake in Apple during the second quarter of 2024, as reported in its latest earnings call. The investment conglomerate trimmed its holdings from 789 million shares to approximately 400 million shares, marking a nearly 50% reduction. Based on last Friday's closing price of $219.86 per share, Berkshire's remaining stake is valued at around $88 billion, equal to about 2.6% of Apple. This move, while surprising in its magnitude, is aligned with Buffett's long-held investment philosophy. Contrary to the common perception of Buffett as a staunch buy-and-hold investor, he has historically made adjustments when he perceives asset valuations to be excessively high. Apple’s substantial price appreciation since 2016, coupled with its rising price-to-earnings ratio—from roughly 12 times at the time of Buffett’s acquisition to 33 times more recently—likely contributed to this decision. Buffett's investment in Apple back in 2016 has been extraordinarily lucrative, with the stock appreciating by around 900% since then. However, despite the impressive returns, Buffett’s decision to sell may have been influenced by concerns about Apple’s core business fundamentals. Although the company has benefited from an expanding valuation, its earnings growth has not been proportionally strong, with profits growing less than twice as much between 2019 and 2023. On another front, Nvidia recently addressed rumors about delays in its new AI chips, stating that the company is progressing as planned. Nvidia's response followed volatile trading in its stock, which has seen considerable fluctuations alongside other tech giants. Despite the turbulence, Nvidia remains a cornerstone in the burgeoning AI market, as investors closely monitor its strategic developments. The Federal Reserve's recent comments also caught investors' attention. Fed officials highlighted that the U.S. economy remains in solid shape, a statement aimed at reassuring markets amid ongoing economic uncertainties. This is especially relevant as the Fed continues to emphasize its dual mandate of promoting maximum employment and stable prices. While inflation has shown signs of moderation, the central bank remains cautious about declaring victory too soon. However, economic indicators are somewhat mixed. The labor market has shown signs of cooling, with the most recent non-farm payroll report reflecting slight declines. At the same time, core inflation has edged closer to the Fed's long-term target, further complicating the central bank's policy decisions. These recent developments offer a nuanced picture of market conditions. Investors are grappling with a blend of corporate strategy shifts, technological advancements, and macroeconomic policy movements. As Buffett's decisions reverberate through the market, and as companies like Nvidia navigate their paths, stakeholders are keenly watching Federal Reserve actions for cues on future monetary policy shifts.