Has Buffet been reading Alt Macro?
No, but he's behaving like he has
One investment theme we’re closely following at Alt Macro is that innovation comes in cycles, creating new incumbents while discarding companies that struggle to remain relevant.
Think Kodak, Nokia, Blockbuster, and other economic powerhouses that didn’t make it in the digital era.
Investors have a lot to gain by staying ahead of these cycles and predicting their winners and losers, and this thesis has a juicy update that involves the legend himself: Warren Buffet.
He has largely missed the tech industry’s exponential rise, but he’s raked in big profits by making Apple Berkshire Hathaway’s largest single holding.
Most recently, though, Berkshire has been offloading millions of Apple shares since the beginning of the year, selling 15% of their bag over the last two quarters.
Warren Buffet explains that he expects taxes to rise, erasing any profits from holding longer. Smart words from a man who could easily tank a company’s share value with the slightest sign of bearishness.
I wager that the legendary investor realizes he’s holding a company struggling to keep pace.
If he and his boardroom pals took their noses out of Apple’s financial statements and shared their macro views of the company over cigars and whiskey, here’s what they would likely be saying to each other.
Before we continue, please bear my rude interruption…
Alternative investing shouldn’t just be for hedge funds and the ultra-wealthy.
Alt Macro is written for individuals like yourself to stay ahead of the pros.
If you feel like this publication would benefit people you know, please refer your friends using the button below.
5 referrals unlock your first reward: Free access to the “Bitcoin for non-techies” course.
Your support will allow me to continue sending you new opportunities, which I hope will transform your financial life.
…And now, back to regular programming
Apple’s got issues
Apple’s iPhone was the most important innovation that started the current tech era. For the last 16 years its flagship device has remained its biggest moneymaker, representing 58% of its overall revenue. But the company has hit some turbulence.
The iPhone’s global market share and number of units sold have flatlined since 2022:
Apple shipped 226 million phones in 2023, one million fewer than the previous year.
The iPhone represented 16% of global smartphone sales in 2022 and 2023, unlike the preceding four years, which saw incremental growth in the overall market captured.
It sounds like a little hiccup for the tech behemoth, but it’s worth noting when trends change from rapid to flatlining growth.
Especially since Apple is running out of ideas to maintain its status as a tech pioneer and deliver the kind of growth that shareholders have gotten used to.
Apple and Web 3.0
AI, blockchain, and the Metaverse are three innovation themes that will set the stage for the next wave of tech - what they call “Web 3.0”. The future of big tech companies rests on how they will perform on these themes.
Here’s how Apple is faring:
Artificial Intelligence:
Apple has lagged on this front and is struggling to keep up with competitors who have more advanced AI models. They’re building the usual use cases such as image generation, prompt-based image editing, and cell phone navigation. Nothing groundbreaking that will set it apart from the pack.
As a stop-gap, so they don’t fall too behind, they’re building partnerships with other market leaders like Google to integrate their Gemini AI engine to their next iPhone version. Other agreements with OpenAI and Baidu (for China) are also in the works.
Blockchain:
This is a strange one. Tim Cook (Apple’s CEO) and Steve Wozniak (Cofounder) both talk highly of Bitcoin and admit to holding some in their personal portfolios. In a world where forward-looking companies are switching their currency reserves to Bitcoin, Apple has shown no inclination in this direction despite holding billions of dollars in cash.
The company has blocked and placed stringent restrictions on crypto-related platforms and briefly removed popular wallets like Metamask and others. This is not the sign of a company about to lead in the field of blockchain tech.
Metaverse:
This is all about Apple’s latest product - the ‘Vision Pro’. It’s an AR/VR headset that Apple is differentiating by dubbing a new category, calling it ‘spatial computing’.
Retailing at $3,500 per unit, the Vision Pro isn’t made for mass adoption. The company expected to sell 800,000 units this year but is now slashing this forecast by 50%.
Despite offering an awesome experience, the Vision Pro doesn’t offer a significant divergence from regular laptop computing, or watching video on a large-screen TV.
Inside Berkshire’s boardroom
Buffet and his team of gurus will understand there’s work to be done at Apple and are likely taking some risk off the table with their latest sale. The company is beginning to look like Microsoft ten years ago when it was behind on all fronts - cloud computing, smartphones, operating systems and the like.
With cash on hand and a new CEO, Satya Nadella steered Microsoft to a 1000% increase in share value since 2014.
With well over a billion dollars in reserves, Apple isn’t going anywhere, but they will need to hit a bull’s eye or two before they can see a turnaround like Microsoft’s.
It took Microsoft a whole decade for its turnaround. Will you be shorting Apple or expect their billions to dominate in their next round of tech innovation? Leave me a comment, or hit reply if you’re reading this from your inbox - I would love to hear from you!