Why Nucor Corporation (NUE) Is the Steel Stock Warren Buffett Would Buy Today

Berkshire Hathaway's recent $850 million investment in Nucor Corporation (NUE) has sent a clear signal to the market: the steel industry's most durable and innovative player is poised to outperform in a shifting economic landscape. For investors seeking a steel stock that aligns with Warren Buffett's principles of durability, dividend strength, and economic moat, Nucor emerges as a compelling case study. Let's dissect why this $10,000 investment could be a cornerstone of a resilient portfolio.

Durability in a Cyclical Industry

Nucor's dominance in the U.S. steel sector is not accidental. As the largest steelmaker in North America, it controls 22.09% of the market as of Q2 2025, outpacing peers with a 4.69% year-on-year revenue growth compared to the industry's 3.14% average. Its Electric Arc Furnace (EAF) technology, which uses 75% recycled scrap, provides a critical advantage. Unlike traditional blast furnaces, EAFs allow Nucor to scale production rapidly in response to demand swings, reducing capital intensity and volatility. This flexibility is a hallmark of a durable business in a cyclical industry.

The company's sustainability initiatives further cement its long-term viability. Nucor's greenhouse gas emissions are 60% below the global steel average, and its alignment with science-based net-zero targets positions it to thrive under tightening environmental regulations. In an era where ESG (Environmental, Social, Governance) criteria increasingly influence capital allocation, Nucor's green credentials are not just ethical—they're economic.

Dividend Strength: A 50-Year Legacy

Nucor is a “Dividend King,” having raised its payout for over 50 consecutive years. Even during the 2020 pandemic, when steel demand plummeted, the company maintained its dividend, distributing 40% of net earnings to shareholders. This discipline reflects a business model that prioritizes shareholder returns without sacrificing reinvestment.

Berkshire's investment in Nucor coincides with a strategic $3 billion capital expenditure plan for 2025, aimed at expanding production capacity and modernizing facilities. This balance of reinvestment and shareholder returns mirrors Buffett's favorite companies—those that compound value through disciplined capital allocation.

Economic Moat: Technology, Scale, and Pricing Power

Nucor's economic moat is built on three pillars:
1. Technological Superiority: EAF technology reduces reliance on volatile raw material prices (e.g., iron ore) and allows Nucor to produce steel at lower costs than competitors.
2. Scale and Diversification: With 10,000+ customers and no single client accounting for more than 5% of revenue, Nucor avoids overexposure to any one market.
3. Pricing Power: Recent strategic price cuts for hot-rolled coil (HRC) in May 2025—lowering the Consumer Spot Price to $880/ton—demonstrate Nucor's ability to adjust pricing while maintaining profitability. This agility is rare in a sector prone to margin compression.

Berkshire's investment also taps into Nucor's exposure to AI-driven infrastructure. As data centers expand to support artificial intelligence, Nucor's steel is critical for constructing the physical backbone of this digital revolution. U.S. steel tariffs, meanwhile, provide a tailwind by shielding domestic producers from subsidized foreign competition.

Strategic Positioning for the Future

Nucor's alignment with Berkshire's philosophy is evident in its long-term vision. The company's 2050 net-zero targets, combined with its role in U.S. infrastructure and AI development, position it to benefit from both policy-driven and demand-driven growth. Its recent 0.87% stock price jump following Berkshire's disclosure underscores market confidence in these fundamentals.

Investment Case: A $10,000 Bet

For a $10,000 investment in NUE today, the potential rewards are clear:
- Dividend Income: At a current yield of ~2.5%, the portfolio would generate ~$250 annually in dividends.
- Capital Appreciation: With a forward P/E of 17.5 and a 22.09% market share, Nucor's valuation reflects optimism about its role in AI infrastructure and U.S. manufacturing revival.
- Risk Mitigation: Nucor's EAF technology and diversified customer base reduce exposure to commodity price swings.

Conclusion

Warren Buffett's investment in Nucor is not a bet on a cyclical commodity—it's a vote of confidence in a company that combines technological innovation, environmental responsibility, and shareholder discipline. For investors seeking a steel stock that embodies durability, dividend strength, and a widening economic moat, Nucor Corporation is the rare combination of quality and value. In a world of uncertainty, NUE offers a blueprint for long-term resilience.

Final Note: While steel prices and macroeconomic conditions remain volatile, Nucor's strategic positioning and operational excellence make it a standout in an industry often overlooked by growth-focused investors. A $10,000 allocation today could compound into a significant portion of a diversified portfolio over the next decade.