Berkshire Hathaway's Apple stake cut sparks major tech sell-off

Warren Buffett's move to cut Apple holdings leads to a significant sell-off, wiping out $900 billion in tech value

Apple (AAPL.O) and Nvidia (NVDA.O) spearheaded a significant sell-off in technology stocks on Monday as US recession concerns and Berkshire Hathaway's (BRKa.N) decision to cut its stake in Apple ended a months-long rally in the sector.

High-performing shares of Alphabet (GOOGL.O), Amazon (AMZN.O), Meta Platforms (META.O), Microsoft (MSFT.O), and Tesla (TSLA.O), along with Apple and Nvidia, fell by as much as 6.5%. This drop in the Magnificent Seven stocks threatened to wipe out nearly $900 billion from their combined market value.

Chip stocks, which had been Wall Street's favourites in the AI trade, also tumbled. Advanced Micro Devices (AMD.O), Intel (INTC.O), Super Micro Computer (SMCI.O), and Broadcom (AVGO.O) fell as much as 7.8%. The Philadelphia Semiconductor Index (.SOX) was down nearly 3%.

The share slide followed a weak US payrolls report on Friday, pushing investors globally towards safer assets and spurring bets that the Federal Reserve might soon cut interest rates to aid growth. Over the weekend, Warren Buffett's Berkshire Hathaway announced it had halved its stake in Apple, raising concerns about the tech industry's outlook.

After leading gains on Wall Street for over a year, big technology stocks have come under pressure recently. Signs that the payoff from hefty AI investments would take longer than expected have contributed to the decline.

Read also: Berkshire sells 390 million Apple shares

Earnings reports from Amazon, Microsoft, and Alphabet have also sowed doubts that their margins could be hit by the billions spent on AI.

"Expectations have arguably become too high for the so-called Magnificent Seven group of companies. Their success has made them untouchable in the eyes of investors and when they fall short of greatness, out come the knives," said Dan Coatsworth, an investment analyst at AJ Bell.

Despite the sell-off, Nvidia shares have nearly doubled in value this year after rising more than 200% in 2023. Other Magnificent Seven stocks, except Tesla, are also in positive territory for 2024. Some analysts suggested that Monday's slide could offer investors an opportunity to buy shares of the big technology firms at better valuations, highlighting the expected long-term returns from generative AI investments and their strong market positions.

PHOTO: REUTERS

"Our playbook for 24 years covering tech stocks on the Street is to handhold investors through the panic and irrational global sell-offs to own the best tech names and winners driving the growth themes," said Dan Ives, an analyst at Wedbush Securities.

Warren Buffett's Berkshire Hathaway, meanwhile, is now sitting on nearly $277 billion in cash, up from a record $189 billion three months earlier. This increase in cash came as Berkshire posted a record quarterly profit from its dozens of operating businesses. Second-quarter operating profit rose 15% to $11.6 billion, or about $8,073 per Class A share, from $10.04 billion a year earlier, with nearly half coming from underwriting and investments in Berkshire's insurance businesses. Net income fell 15% to $30.34 billion from $35.91 billion a year earlier.

Top ten Berkshire Hathaway investments

Company	Holdings	Stake	Mkt. price	Value	% of portfolio
Apple Inc	789,368,450	5.10%	$219.86	$173,550,547,417	44.30%
2. Bank of America Corp	942,429,882	12.10%	$37.58	$35,416,514,966	9.00%
3. American Express Company	151,610,700	21.30%	$232.28	$35,216,133,396	9.00%
4. Coca-Cola Co	400,000,000	9.30%	$69.33	$27,732,000,000	7.10%
5. Chevron Corp	122,980,207	6.70%	$148.55	$18,268,709,750	4.70%
6. Occidental Petroleum Corp	255,281,524	28.80%	$57.67	$14,722,085,489	3.80%
7. Kraft Heinz Co	325,634,818	26.90%	$36.06	$11,742,391,537	3.00%
8. Moody’s Corp	24,669,778	13.50%	$460.59	$11,362,653,049	2.90%
9. Chubb Ltd	25,923,840	6.40%	$271.32	$7,033,656,269	1.80%
10. Mitsubishi Corp	358,492,800	8.60%	$19.37	$6,943,145,591	1.80%

Source: CNBC Berkshire Hathway Portfolio Tracker as of last reported filing.

Buffett's move to slash Berkshire Hathaway’s massive Apple stake could prove unsettling for the broader stock market, especially given the recent weak tech earnings, a disappointing jobs report, and overall market uncertainty.