Berkshire Hathaway becomes first non-tech US firm to hit $1 trillion market cap

Warren Buffett’s conglomerate, Berkshire Hathaway, reached an important milestone by becoming the first US company outside the technology sector to surpass a market value of $1 trillion.

The company’s shares rose by 0.8%, pushing its market capitalisation above the trillion-dollar mark for the first time on Wednesday.

The company has had an impressive year, with its stocks climbing 30% in 2024, outperforming the S&P 500’s gain of 18% so far. This surge has added more than $200 billion to Berkshire’s market capitalisation this year alone, a record for the firm.

However, it’s a huge contrast to the nearly $2 trillion increase in value seen by Nvidia, another market giant.

Berkshire Hathaway, based in Omaha, Nebraska, now joins a select group of companies that have reached this milestone, a group previously dominated by technology giants like Alphabet Inc., Meta Platforms Inc., and Nvidia Corp.

Although Berkshire is not a tech firm, its stock performance this year is not far behind the so-called ‘Magnificent Seven,’ which refers to the top tech stocks, up 35% in 2024.

Warren Buffett, often regarded as one of the greatest investors of all time, has spent decades transforming Berkshire Hathaway from its origins as a textile manufacturer into a sprawling business empire.

He accomplished this alongside his longtime business partner, Charlie Munger, who passed away in November at the age of 99.

Berkshire Hathaway’s impressive performance over the years is evident in its market value growth, which has averaged around 20% annually from 1965 through 2023, nearly double the average annual return of the S&P 500. This consistent growth has made Buffett one of the richest individuals in the world and solidified his reputation as a prolific investor.

The recent surge in Berkshire’s market value comes amid growing optimism about the US economy. With the Federal Reserve expected to cut interest rates in its September meeting, consumer confidence has reached a six-month high in August. However, lower interest rates could impact returns on Berkshire’s substantial cash reserves, which stood at about $276.9 billion at the end of the second quarter.

A significant portion of this cash reserve was accumulated after Berkshire reduced its stake in Apple Inc., the iPhone maker, a move that surprised many. Apple has long been considered a cornerstone of Berkshire’s investment portfolio, and Buffett himself had referred to Apple as the “pillar” of Berkshire’s business. Despite the reduction, Apple CEO Tim Cook has stated that he still considers it a privilege to have Berkshire as a major shareholder.

Berkshire Hathaway’s strength is further highlighted by its recent financial performance. The company reported a record quarterly profit in the first quarter of 2024, driven by a significant increase in income from its insurance underwriting business. Operating profit for the quarter rose by 39% to $11.22 billion, or about $7,807 per Class A share, up from $8.07 billion a year earlier.

Despite this strong performance, Berkshire’s income for the quarter fell to $12.7 billion, or $8,838 per share, down from $35.5 billion in the same period last year. This decline was largely due to an accounting rule that requires the company to report unrealized gains and losses from its stock investments, which can introduce significant volatility in its financial results. Buffett has consistently urged investors to disregard these fluctuations and focus on the company’s long-term performance.

In addition to its strong financial results, Berkshire Hathaway continued to repurchase its own stock, buying back $2.6 billion worth of shares in the first quarter and a small amount in the first few weeks of April. The company’s cash reserves increased to $189 billion by the end of the first quarter, surpassing the previous record set at the end of last year.

This milestone for Berkshire Hathaway is a testament to the company’s enduring strength and the strategic vision of Warren Buffett. As the first non-tech US firm to reach a market value of $1 trillion, Berkshire Hathaway has cemented its place among the world’s most valuable companies.