Omaha, NE – Warren Buffett, the renowned billionaire investor, has been a long-time supporter of Apple (NASDAQ: AAPL). However, recent reports suggest that Buffett’s enthusiasm for the tech giant may be waning. In the fourth quarter of 2023, Buffett’s company, Berkshire Hathaway, reduced its stake in Apple.
This decision was made prior to the announcement from the U.S. Department of Justice (DOJ) that they, along with 16 state and district attorneys general, were filing an antitrust lawsuit against Apple. The lawsuit alleges that Apple violated antitrust laws by maintaining a monopoly in the smartphone market.
The DOJ’s complaint against Apple includes several specific allegations, such as blocking iPhone apps that would facilitate switching to other smartphone platforms, impeding the development of mobile cloud streaming services, excluding certain messaging apps, limiting the functionality of rival devices, and constraining rival digital wallets.
Apple has strongly denied all of these allegations, stating that the lawsuit “threatens who we are and the principles that set Apple products apart.” The company plans to vigorously defend itself against the lawsuit.
While there is speculation about whether Buffett will sell more Apple stock as a result of the DOJ lawsuit, it is doubtful. Buffett has historically stood by his favorite companies in the face of antitrust scrutiny. For instance, Berkshire Hathaway did not sell any shares of Coca-Cola when it faced investigations by European Union and U.S. antitrust regulators.
Furthermore, Buffett has previously expressed his high regard for Apple, calling it “a better business” than any other in Berkshire Hathaway’s portfolio. Given his steadfastness and belief in the company, it is unlikely that the DOJ’s allegations would sway his opinion so quickly.
Moreover, it is uncertain whether Buffett himself made the decision to sell Apple shares in the fourth quarter. The sale could have been made by one of Berkshire’s other investment managers or a subsidiary portfolio over which Buffett has no direct control.
As for whether investors should consider selling their Apple stock, there are valid reasons to contemplate it. The company’s growth has slowed considerably, and its valuation may be too high considering this sluggishness, with shares trading at a forward earnings multiple of 26x.
However, it may be premature to sell solely based on the DOJ lawsuit. Apple is likely to mount a strong defense against the antitrust allegations, and the lawsuit may prove to be more of a distraction than a substantial threat.
Additionally, there is a compelling reason to hold on to Apple stock. The company’s CEO, Tim Cook, recently stated that Apple is heavily investing in generative AI and plans to break new ground in this field. As Apple’s annual developers conference approaches, many anticipate the company will unveil its AI strategy, potentially boosting the stock’s performance.
While the DOJ antitrust lawsuit could take years to resolve, Apple could have significant AI-related news in the near future. Consequently, both Buffett and other investors may choose to retain their shares, potentially regretting any decision to sell before Apple reveals its AI strategy.
In conclusion, despite the DOJ lawsuit, Warren Buffett’s stance on Apple is unlikely to change abruptly. While there are legitimate reasons to consider selling Apple stock, the outcome of the lawsuit and the company’s future AI developments may significantly impact its trajectory. Investors must weigh all factors carefully before making any decisions.
Should you invest $1,000 in Apple right now? Before you jump in, consider the analysis provided by the Motley Fool Stock Advisor team. They have identified what they believe to be the 10 best stocks for investors to buy now, with the potential for substantial returns in the coming years. It is worth exploring these stocks and educating yourself about Apple’s position in the market.
Keith Speights, the author of this article, holds positions in Apple and Berkshire Hathaway. The Motley Fool also has positions in and recommends Apple and Berkshire Hathaway. For more information, please refer to the disclosure policy of the Motley Fool.