The AI surge is not comparable to the dot-com bubble, according to tech investor Ross Gerber, and Warren Buffett was mistaken to reduce his Apple stake.
According to the report, the CEO and cofounder of Gerber Kawasaki Wealth & Investment Management said he “traded through” the internet frenzy at the start of the new millennium. The enthusiasm for AI “just isn’t comparable,” he said.
The benchmark index produced comparable gains for five years, from 1995 to 1999, but the S&P 500’s 20% returns in 2023 and 2024 might not appear sustainable, according to Gerber. In 1994, he noted, his career began with “perfect timing”.
Businesses in the Magnificent Seven are viewed as expensive “because people have never seen numbers that big,” according to Gerber, when they trade at high earnings multiples. However, the tech investor described their profitability as “just insane” and stated that their values are in line with their companies.
Last quarter, Nvidia’s profits increased by more than 50% year over year, while Alphabet’s net income exceeded $100 billion.
According to Gerber, whose company managed over $3 billion in client assets and made investments in Tesla and Nvidia about 10 years ago, AI has a huge potential to boost productivity and profits. Using smartphones as an example, he referred to them as “counter useful” and “time wasters.”
Berkshire Hathaway, according to Gerber, has a “portfolio of the past.”
In the 18 months leading up to June 30, Berkshire Hathaway, owned by Warren Buffett, sold off about 70% of its Apple stock, demonstrating its lack of interest in the AI craze.
Gerber told that he believed Buffett could have reduced the stake because it had grown too “heavy”; by the end of 2023, it was worth $174 billion, or about half of Berkshire’s total stock wealth.
Gerber, however, stated that he still believed the sale was “dumb” since it was a sizable realized gain that was subject to taxes and that, in the long run, there was nothing he could invest in that would be superior to Apple.
Apple will “continue to mint profits for a very long time and be a part of our kids’ lives forever,” Gerber said, adding that he didn’t see any “wisdom” in selling.
According to its most recent portfolio disclosure, Gerber Kawasaki listed Apple as one of its top assets at the end of June, with a $78 million investment.
Many Berkshire equities and businesses, like the BNSF Railway, “haven’t done that well” in recent years, according to Gerber.
Adding that new CEO Greg Abel and his team would “have a lot of work to do” to reposition it, he stated that while Berkshire had the ideal portfolio of the past, it is unquestionably not the ideal portfolio of the future.
Buffett was also criticized by Gerber for placing a wager on Kraft Heinz, which announced on Tuesday that it will split into two businesses.
As consumer preferences shifted toward healthier alternatives, Gerber said he had publicly questioned the investment and the reason Buffett had teamed up with 3G Capital, a private equity firm that had a history of implementing large layoffs.
“I don’t see where value’s created on a bunch of old brands that nobody wants,” Gerber stated. Additionally, terminating people won’t provide any economic value. And that turned out to be accurate.
After meeting Buffett, Gerber said, “I realized he’s no joker.”
Gerber remembered meeting Buffett at an event for then-candidate Barack Obama amid the 2008 financial crisis.
Gerber, who was employed by SunAmerica, an AIG-owned company, told that he asked the Berkshire chairman if he would think about purchasing AIG in order to ease the insurance behemoth’s problems.
“Then he said to me, ‘You’re crazy,’ and he got into the car and drove away,” Gerber said. When I looked him in the eye, I understood that he was no joker at all.”
In September of that year, the US government bought almost 80% of AIG as part of a wave of bailouts of businesses that were seen to be “too big to fail.”
Buffett “plays that role really well,” according to Gerber, so people may see him as a “stodgy, old, fun, nice guy,” but in actuality, he’s “one of the most cutthroat businessmen of all time.”
Gerber claimed that Buffett had “set up his successors in a perfect way” by giving them the authority and resources to carry out their plans, and that he was “retiring on top” by leaving his position as CEO at the end of this year.
“Something great” about those who know when to “leave gracefully,” Gerber remarked. “I think Buffett’s done a great job of that.”
