Warren Buffett and tech stocks go together like…well, they usually don’t go together. The legendary investor typically avoids stocks that are out of his wheelhouse. And tech isn’t his strong suit.
Unsurprisingly, Buffett doesn’t own a single share of Nvidia (NASDAQ: NVDA). So, has he missed out on the artificial intelligence (AI) stock’s massive gains over the last few years? Not entirely.
Buffett’s direct ways of profiting from Nvidia
Although Buffett doesn’t own any shares of Nvidia, Berkshire Hathaway‘s portfolio includes two exchange-traded funds (ETFs) that do. As a result, he has directly profited as Nvidia stock has skyrocketed.
Nvidia was added to the S&P 500 in 2001, replacing the beleaguered energy company Enron. In the fourth quarter of 2019, Berkshire initiated positions in two S&P 500 index ETFs — the SPDR S&P 500 ETF Trust (NYSEMKT: SPY) and the Vanguard S&P 500 ETF (NYSEMKT: VOO). The conglomerate hasn’t sold shares of either ETF since then.
Granted, Buffett hasn’t directly profited very much from Nvidia’s gains via Berkshire’s stakes in these two S&P 500 index ETFs. For one thing, Berkshire owns only small positions in the funds — 39,400 shares of the SPDR ETF and 43,000 shares of the Vanguard ETF. These holdings comprise less than 0.1% of Berkshire’s total portfolio. For several years, Berkshire’s wholly owned subsidiary, New England Asset Management (NEAM), has also owned positions too small to move the needle much in both ETFs.
Additionally, Nvidia makes up only 7.25% of the S&P 500, which is weighted based on market cap. When Berkshire first bought the two S&P 500 ETFs in late 2019, the AI stock had a much smaller weight than it does now.
How the “Oracle of Omaha” has indirectly profited from Nvidia
Buffett has indirectly profited from Nvidia’s remarkable rise, too. Exactly how he’s done so requires some deductive analysis.
Let’s start with the fact that the stocks of the leading cloud services providers have performed exceptionally well recently. Shares of Amazon (NASDAQ: AMZN), whose Amazon Web Services (AWS) is the top cloud service…
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