Warren Buffett and technology stocks go together as if… well, they usually don't. The legendary investor usually avoids stocks that are outside his wheelhouse. Technology is not his strong suit.
Unsurprisingly, Buffett does not own a single share of… Nvidia (Nasdaq: NVDA). So, did he miss the massive gains that AI stocks have made over the past few years? not exactly.
Buffett's direct ways to profit from Nvidia
Although Buffett does not own any shares in Nvidia, Berkshire HathawayWallet's includes two Exchange Traded Funds (ETFs) This is what he does. As a result, he directly benefited from Nvidia's stock rising dramatically.
Nvidia added to Standard & Poor's 500 In 2001, to replace the beleaguered energy company Enron. In the fourth quarter of 2019, Berkshire initiated positions in two S&P 500 ETFs – SPDR S&P 500 ETF (NYSE: SPY) And the Vanguard S&P 500 ETF (NYSEMKT: flight). The group has not sold shares of any ETFs since then.
To be sure, Buffett didn't directly benefit much from Nvidia's gains via Berkshire's stakes in those two S&P 500 ETFs. For one thing, Berkshire has only small positions in the funds — 39,400 shares in the SPDR ETF and 43,000 shares in the Vanguard ETF. These holdings make up less than 0.1% of Berkshire's total portfolio. For several years, Berkshire's wholly-owned subsidiary, New England Asset Management (NEAM), also held positions that were too small to move the needle much in both ETFs.
Additionally, Nvidia makes up only 7.25% of the S&P 500 Index, which is weighted based on market cap. When Berkshire first bought the two S&P 500 ETFs in late 2019, AI stock's weighting was much smaller than it is now.
How the “Oracle of Omaha” indirectly benefited Nvidia
Buffett has indirectly benefited from Nvidia's remarkable rise as well. Exactly how he did it requires some deductive analysis.
Let's start with the fact that stocks of leading cloud providers have performed exceptionally well recently. shares Amazon (Nasdaq: AMZN)whose Amazon Web Services (AWS) is the best cloud services platform, is up 81% in the past year and more than 20% year-to-date. Microsoft (NASDAQ:MSFT) The stock jumped 57% in 2023 and is up nearly 20% this year. the alphabet (NASDAQ:GOG)(Nasdaq:Google)which operates Google Cloud, saw its shares rise 58% last year and more than 25% so far in 2024.
There is no doubt that AI is booming, especially with its increasing adoption Generative artificial intelligence, was a major factor in the performance of all three cloud stocks. Most importantly, Amazon, Microsoft, and Alphabet are major customers of Nvidia. The three companies almost certainly weren't able to handle the growing demand for cloud services using Nvidia's AI chips.
So I think it's fair to say that Nvidia is partly responsible for the stock price gains seen by Amazon, Microsoft, and Alphabet. However, it's difficult to say how much of these gains can be attributed to Nvidia.
So, how does this relate to Buffett? First, Berkshire owns 10 million shares of Amazon. Second, NEAM (Berkshire's subsidiary) has positions in Alphabet and Microsoft. Third, all three cloud stocks are also major holdings in Berkshire's two S&P 500 ETFs.
You may have made money from Nvidia in the same ways
It's possible (and probably even likely) that you could be in the same position as Buffett – profiting from Nvidia without owning the stock. The SPDR S&P 500 ETF Trust is the largest ETF based on assets under management, while the Vanguard S&P 500 ETF ranks third. Even if you do not own any ETFs, your investment portfolio may include one or more ETFs or mutual funds with positions in Nvidia.
Amazon, Alphabet, and Microsoft are also widely held stocks. You can either own some or all of them directly or own money with shares in mega stocks.
Granted, these ways to make money from Nvidia aren't nearly as rewarding as owning shares in the graphics processing unit (GPU) maker. But it could at least provide some solace to investors who beat themselves up for not buying Nvidia sooner. It also underscores one advantage of investing in S&P 500 ETFs: Big winners like Nvidia get increasingly higher weightings in the index as their market capitalization grows — and they can make more money in the process.
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Susan Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Keith Speights He has positions in Alphabet, Amazon, Berkshire Hathaway, Microsoft, and the Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Alphabet, Amazon, Berkshire Hathaway, Microsoft, Nvidia, and the Vanguard S&P 500 ETF. The Motley Fool recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has Disclosure policy.
Warren Buffett Doesn't Own NVIDIA Here's How He Profited from the Artificial Intelligence (AI) Stock's Big Gains Anyway Originally published by The Motley Fool