Apple remains Buffett’s biggest public stock holding, but his thesis about its moat faces questions
Tim Cook and Warren Buffett
Getty Images (L) | CNBC (R)
Berkshire Hathaway‘s Warren Buffett was still using a flip phone as late as 2020, four years after his investment behemoth started amassing a huge stake in the company that makes iPhones.
“I don’t understand the phone at all, but I do understand consumer behavior,” Buffett said last year at Berkshire’s annual shareholder meeting in Omaha, Nebraska.
He’s emerged in recent years as one of Apple’s top evangelists.
At the end of 2023, Berkshire owned about 6% of Apple, a stake worth $174 billion at the time, or about 40% of Berkshire’s total value. That’s about four times bigger than Berkshire’s second-biggest public stock holding, Bank of America, and makes Berkshire the No. 2 Apple shareholder, behind only Vanguard.
As Berkshire investors and fanboys of the 93-year-old Buffett flood Omaha this weekend for the 2024 annual meeting, Apple is likely to be a hot topic of discussion. The tech giant on Thursday reported a 10% year-over-year decline in iPhone sales, leading to a 4% drop in total revenue. But the stock had its best day since late 2022 on Friday due largely to a $110 billion stock buyback plan and increased margins that result from a growing services business.
The bet on Apple and CEO Tim Cook, has paid off handsomely for Buffett, who said in 2022 that the cost of Berkshire’s Apple stake was only $31 billion. His firm is up almost 620% on its investment since the start of 2016.
Despite being a self-described luddite, Buffett has long had a coherent non-techie thesis for loving Apple. He’s seen how devoted Apple users are to their devices, and has viewed the iPhone as an extraordinary product that could keep its customers spending inside the Apple ecosystem. He calls it a moat, one of his favorite words for describing his preferred businesses.
“Apple has a position with consumers that they’re paying $1,500 or whatever it may be for a phone, and these same people pay $35,000 for a second car,” Buffett said at last year’s meeting. “And if they had to give up their second car or give up their iPhone, they’d give up their second car!”
Data is in his favor. According to a study from Consumer Intelligence Research Partners, Apple has 94% customer loyalty, meaning that nine out of 10 current U.S. iPhone owners choose another iPhone when buying a new device.
Buffett has also hailed Apple’s ability to return billions of dollars to shareholders annually through share buybacks and dividends, a capital allocation strategy for which Buffett may have himself to thank. When asked in a 2016 interview with The Washington Post who he turns to for advice at pivotal moments, Cook offered up a story about his relationship with Buffett.
“When I was going through [the question of] what should we do on returning cash to shareholders, I thought who could really give us great advice here? Who wouldn’t have a bias?” Cook said. “So I called up Warren Buffett. I thought he’s the natural person.”
Apple has shown its appreciation for the Oracle of Omaha in other ways.
In 2019, the company published an original iPhone game called “Warren Buffett’s Paper Wizard” in which a paperboy bikes from Omaha to Apple’s hometown of Cupertino, California.
But with Apple’s business having declined in size in five of the past six quarters and with the company expecting just low-single digit growth in the current quarter, Buffett may face questions this weekend about whether he still sees the same power in the moat, particularly with regulatory pressures building around tech’s megacap companies.
Buffett trimmed his stake in Apple late year, though only by about 1%. Even after Friday’s rally, the stock is down 3.8% in 2024, while the S&P 500 is up 7.5%.
‘Very, very, very locked in’
Berkshire’s initial foray into Apple in 2016 was not Buffett’s idea. Rather, the investment was led by Ted Weschler, one of Buffett’s top deputies, and was seen as a passing of the torch to the next generation of Berskhire investment mangers.
But the following year, Berkshire started purchasing even more Apple, and Buffett began talking it up. He said he liked the stock and the company’s “sticky” product, although he didn’t use it.
In 2018, he said Apple users are “very, very, very locked in, at least psychologically and mentally” to the product and the ecosystem.
“Apple has an extraordinary consumer franchise,” he said.
At last year’s annual meeting, when asked how Berkshire can defend having Apple make up so much of its public portfolio, Buffett said, “It just happens to be a better business than any we own.” He also hailed Cook, calling him one of the “best managers in the world.”
A number Apple likes to use to tout the health of its business, despite the declining revenue, is 2.2 billion. That’s how many devices the company says are currently in use and points to the massive customer base available as Apple rolls out new subscription services.
“Once customers get into the ecosystem, they don’t leave. So it’s not a a speculative tech play,” said Dan Eye, chief investment officer at Fort Pitt Capital Group, which owns Apple shares. “It’s kind of more like an annuity and I think that’s what Warren Buffett really sees as well.”
In addition to the drop in revenue, Apple faces new challenges from regulations and weak overseas markets, as well as from Microsoft and Google’s advancements in artificial intelligence. For regulators, the concern surrounds the very moat that Buffett finds so attractive, and whether its give the company monopolistic control in the smartphone market.
The U.S. government in March alleged that Apple designs its business to keep customers locked in. The Justice Department’s lawsuit claimed that products like Apple Card, the Apple Arcade game subscription, iMessage, and Apple Watch work best or only with an iPhone, creating illegal barriers to competition and making it harder for consumers to switch when it’s time for an upgrade.
However, the litigation is expected to take years, pushing any potential penalties to Apple and its products well into the future. In the meantime, there’s no sign that the iPhone is becoming less important as new devices like virtual reality goggles have found only niche audiences, while consumer AI products have failed to take off.
Buffett hasn’t voiced his view publicly on Apple’s regulatory hurdles, and this will be the first opportunity for investors to ask him about the issue since the DOJ’s lawsuit. But Buffett knows a little something about regulation — two markets where he’s most active are railroads and insurance.
In a note to clients earlier this month, Bernstein analyst Toni Sacconaghi didn’t go deep on regulatory concerns, but mentioned that he doesn’t believe the DOJ suit will “seriously threaten” the strength of Apple’s ecosystem. He also said that following Buffett’s lead on getting in and out of Apple is a solid strategy for making money.
“Despite his reputation as a long term buy and hold investor, Warren Buffett has been remarkably disciplined at adding to his Apple position when it is relatively cheap and trimming when it is relatively expensive,” Sacconaghi wrote. He encouraged investors to “be like Buffett.”
More money back
Odds are that Buffett was thrilled with Apple’s announcement this week regarding its expanded repurchase program. It’s a practice he’s long adored.
“When I buy Apple, I know that Apple is going to repurchase a lot of shares,” he said in 2018.
And he likes to note how buybacks result in getting a bigger stake in the company without buying more shares.
“The math of repurchases grinds away slowly, but can be powerful over time,” Buffett said in 2021.
Apple also increased its dividend by 4%, and signaled that it would continue to lift it annually.
Buffett was effusive about Apple’s capital return strategy at the company’s annual meeting last year, pointing out that it helped Berkshire own a bigger piece of the pie. Unlike insurance company Geico and homebuilder Clayton Homes, which his firm owns in their entirety, Berkshire can continue to increase its stake in Apple, a fact he reminded investors of at the meeting.
“The good thing about Apple is that we can go up,” Buffett said.
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Altman and Musk launched OpenAI as a nonprofit 10 years ago. Now they’re rivals in a trillion-dollar market
Open AI CEO Sam Altman speaks during a talk session with SoftBank Group CEO Masayoshi Son at an event titled “Transforming Business through AI” in Tokyo, Japan, on February 03, 2025.
Tomohiro Ohsumi | Getty Images
On Dec. 11, 2015, OpenAI launched as a nonprofit research lab after Elon Musk and a group of prominent techies, including Peter Thiel and Reid Hoffman, pledged $1 billion to develop artificial intelligence for the benefit of humanity. The idea was for the project to be be free of commercial pressures and the pursuit of money.
A decade later, that founding mission is all but forgotten.
Musk, now the world’s richest person, is long gone, having created rival startup xAI. And he’s been engaged in a heated legal and public relations fight with OpenAI CEO and co-founder Sam Altman.
Far from the nonprofit realm, OpenAI has emerged as one of the fastest-growing commercial entities on the planet, zooming to a $500 billion private market valuation, with almost all of that value accruing since the company’s launch of ChatGPT three years ago. More than 800 million people now use the chatbot every week.
Musk’s xAI, meanwhile, is expected to close a $15 billion round at a $230 billion pre-money valuation this month, sources familiar with the matter told CNBC’s David Faber in late November.
OpenAI and xAI are two of the main companies, along with Google, Anthropic and Meta, pouring money into AI models, as the market rapidly evolves from text-based chatbots to AI-generated videos and more advanced compute-intensive forms of content, as well as into agentic AI, with large enterprises customizing tools to enhance productivity.
For OpenAI, the price tag is almost incomprehensible: $1.4 trillion and growing. That’s primarily for the mammoth data centers and high-powered chips required to meet what the company sees as insatiable demand for its technology. For now, OpenAI is a cash-burning machine going up against tech’s megacaps and their chip suppliers, drawing comparisons to earlier waves of high-growth tech firms that spent heavily for years to challenge behemoth incumbents, but to mixed results.
“OpenAI has a very big role in the in the history of the development of artificial intelligence, and will forever have that role,” said Gil Luria, an equity analyst at D.A. Davidson, in an interview. “Now, will that role be Netscape, or will it be Google? We’ve yet to find out.”
Nvidia CEO Jensen Huang speaks at an event ahead of the COMPUTEX forum, in Taipei, Taiwan, June 2, 2024.
Ann Wang | Reuters
It’s a position that would’ve been hard to imagine in 2016, when Nvidia CEO Jensen Huang hauled a black DGX-1 supercomputer up to OpenAI’s offices in San Francisco’s Mission District. The $300,000 machine had cost Nvidia “a few billion dollars” to develop, and there were no other buyers, Huang recalled recently on Joe Rogan’s podcast.
Musk, at OpenAI, was the only one who wanted it.
When Musk told him it was for “a nonprofit company,” Huang said all the blood drained from his face at the thought of parking such a costly box inside an organization that wasn’t meant to make money.
Behind the scenes, though, the nonprofit ideal was already under intense strain, and Musk didn’t like what he saw.
“Guys, I’ve had enough. This is the final straw,” Musk wrote in an email to his co-founders in 2017. He warned that he would “no longer fund OpenAI” if it turned into a tech startup instead of a nonprofit. Altman wrote back the next morning: “i remain enthusiastic about the non-profit structure!”
Altman vs. Musk
In February of the following year, Musk left the OpenAI board, and said at the time the move was to avoid a potential conflict of interest as his car company, Tesla, dove deeper into AI.
The story was more complicated.
Musk sued OpenAI and Altman in early 2024, alleging they abandoned the company’s founding mission to develop AI “for the benefit of humanity broadly,” and he’s regularly criticized OpenAI’s close ties to Microsoft, its principal backer. He also went to court to try and keep OpenAI from converting into a for-profit entity and, earlier this year, went so far as to try and acquire the AI lab for $97.4 billion.
In October, OpenAI announced it had completed a recapitalization, cementing its structure as a nonprofit with a controlling stake in its for-profit business, which is now a public benefit corporation called OpenAI Group PBC.
Musk isn’t the only early OpenAI team member who’s turned into a bitter rival. Siblings Dario and Daniela Amodei left OpenAI in late 2020 to form Anthropic, which said last month that Microsoft and Nvidia would invest in the company. The valuation from the funding round could reach as high as $350 billion.
Anthropic’s Claude family of large language models is one of the biggest competitors to OpenAI’s GPT models.
Altman is wagering that he can win the race by outspending the competition. While his company has sketched out plans for a trillion-dollar-plus AI infrastructure outlay, Anthropic has made roughly $100 billion in recent compute commitments, spaced out at various intervals over the next few years.
It all amounts to a giant bet that demand for AI services will continue apace.
“We’ve got all the various AI vendors making these huge capital investments,” said David Menninger, executive director of software research at ISG. “There’s a question as to how long those capital investments continue and whether or not they all pan out.”
Luria says Anthropic and others are making reasonable commitments based on their current growth trajectory and the funding they’ve already secured. But he said OpenAI’s approach has been based on a “fantastical set of commitments” with a “faint belief that those numbers are even possible.”
‘Pretty extreme’
Altman told CNBC in an interview on Thursday that OpenAI is already seeing enough demand to justify its spending plans, which “makes us confident that we will be able to significantly ramp revenue.”
“It’s obviously unusual to be growing this fast at this kind of scale, but it is what we see in our current data,” Altman said, adding that “the demand in the market is pretty extreme.”
Altman said last month that he expects annualized revenue to hit $20 billion by the end of this year and to reach hundreds of billions by 2030. Its historic pace of growth has been a big boon for major tech companies.
Oracle signed a roughly $500 billion deal to sell infrastructure services to OpenAI over five years. Chipmakers Advanced Micro Devices and Broadcom have woven OpenAI-linked demand into multi-year forecasts.
But Oracle’s shares plunged 11% on Thursday after the software vendor reported weaker-than-expected revenue, a miss that dragged down Nvidia, CoreWeave and other AI-related stocks. Despite a surge in long-term contract commitments from companies like OpenAI, Meta, and Nvidia, investors are growing concerned about Oracle’s debt load that’s fueling its buildout.
Still, venture capitalist Matt Murphy of Menlo Ventures, said that in his 25 years in the venture business, “this is the mother of all waves.”
Murphy, an early investor in Anthropic, said the combination of AI models, custom chips and hyperscale data centers adds up to the potential for trillion-dollar outcomes. That explains the eye-popping level of capital expenditures and the astronomical valuations, he said.
Altman recently declared a “code red” inside his company, and shuffled resources to focus on making ChatGPT faster, more reliable and more personal, while delaying work on ads, health and shopping agents and a personal assistant called Pulse. His declaration came after Google released its Gemini 3 model last month, further accelerating the search giant’s ascent in the market.
On Thursday, OpenAI unveiled ChatGPT-5.2, a faster, more capable reasoning model that the company says is its best system yet for everyday professional use. It also struck a three-year, $1 billion content and equity deal with Disney around the Sora AI video generator.
Altman downplayed the threat from Google, telling CNBC that Gemini had less of an impact on the company’s metrics than OpenAI initially feared.
“I believe that when a competitive threat happens, you want to focus on it, deal with it quickly,” Altman said.
He said he expects the company to exit code red by January.
— CNBC’s Kif Leswing contributed to this report.
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