While Apple Remains Berkshire‘s Top Holding, Buffett Cuts Stake in Half

While Warren Buffett‘s conglomerate only initiated its Apple investment in 2016, the company has been the cornerstone of Berkshire Hathaway‘s investment since then, accounting for a staggering 50% of its holdings in 2023.

However, a shift has occurred over the past year in Berkshire Hathaway‘s strategy, as it slashed its Apple stake by nearly half during the second quarter of 2024, following a 13% reduction in the first quarter. While Buffett maintains optimism and a bullish view about Apple, this significant divestment suggests a strategic pivot that he expressed being towards building Berkshire‘s cash reserves.

Apple‘s stock price, after soaring nearly 50% in 2023, tumbled over 8% in the first quarter of 2024, according to ActivTrades data. Investor concerns about declining Chinese sales and overall slowing growth likely contributed to this downturn. This contrasted sharply with the S&P 500‘s 10% gain and the Nasdaq‘s 8% rise during the same period.

Apple‘s Struggles Continue in China

Apple‘s dominance in China‘s smartphone market is facing unprecedented challenges. iPhone sales plummeted by 19.1% in the first quarter of 2023, according to a Counterpoint Research‘s report published last April.

This sharp decline coincides with Huawei‘s resurgence,as the domestic giant saw a staggering 69.7% sales surge. Huawei‘s strengthened position, particularly in the premium segment, has significantly eroded Apple‘s market share.

Greater China, comprised of mainland China, Taiwan, and Hong Kong, once Apple‘s most lucrative market, witnessed a 6% sales decline last quarter, despite accounting for nearly half of the company‘s total revenue. While currency fluctuations impacted sales, the underlying weakness in the mainland market is undeniable.

To counter these challenges, Apple is betting on its upcoming iPhone and the integration of advanced AI capabilities.

By introducing AI-powered features like enhanced Siri, advanced photo editing, and intelligent text interaction, Apple aims to differentiate its products and regain lost ground. However, navigating China‘s complex regulatory landscape while successfully implementing AI technology will be crucial for the company‘s success.

UBS Analyst Cast Doubt on Apple‘s Growth

There is still a lack of consensus among analysts on the possible influence that Apple Intelligence, its push into artificial intelligence, might have on iPhone sales. While there are many who believe that the software will usher in a new age of iPhone sales, there are others who take a more cautious approach.

Apple‘s stock experienced a meteoric rise of over 35% between April‘s low and its mid-July peak of $237 per share. This surge was primarily driven by investor excitement following the company‘s ambitious AI announcements at the June Worldwide Developers Conference (WWDC).

Key AI initiatives unveiled at the conference included deeper integration with OpenAI‘s ChatGPT to enhance Siri‘s capabilities, the introduction of customizable Genmoji emojis powered by Apple‘s AI, and the expansion of Apple‘s Writing Tools to seamlessly work within third-party applications.

Apple‘s potential new iPhones, which would be driven by artificial intelligence, are expected to revolutionise the smartphone industry, which is fuelling long-term optimism over Apple‘s stock. Recent price drops, on the other hand, indicate that investors are pondering the real impact of AI on Apple‘s future results.

David Vogt, an analyst at UBS, is among those who are sceptical. Despite the fact that Apple‘s revenue for last quarter exceeded projections, mostly due to the performance of the iPad, other areas did not meet expectations, such as Mac and Wearables, Home, and Accessories. In addition, the company‘s forecast for the current quarter shows that the firm would continue to see only modest growth.

While Vogt continues to retain a “Hold” recommendation on Apple, with a price target of $190, this indicates that he has a cautious stance on the company‘s potential for growth in the foreseeable future.

Apple Technical Snapshot from ActivTrades

Apple shares experienced a significant downturn yesterday, plunging by 4.96% after opening with a nearly 10% gap down.This sharp decline pushed the stock price into the green Ichimoku cloud, often interpreted as a zone of equilibrium or consolidation.

Technically, the Relative Strength Index (RSI) has rapidly approached oversold territory following the sharp price drop.Prior to this, the RSI had been gradually declining and hovering near the neutral level of 50, indicating a loss of upward momentum.

The bearish gap and subsequent price action suggest a potential shift in market sentiment towards Apple. While the Ichimoku cloud provides initial support, traders should closely monitor price action and RSI developments for indications of a potential trend reversal or continued downside pressure.

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