Buffett’s Sudden About-Face

Buffett's Sudden About-Face

As he approaches his 96th birthday, Warren Buffett is making a big commitment to AI. Yes, that’s a radical departure. No, it’s not a sign that he’s losing his marbles.

As you might know, Buffett was notoriously gun-shy about technology investments during his many decades running Berkshire Hathaway. 

He was adamant about investing only in things he could readily understand. Early on it was insurance (Geico). Later it was soft drinks (Coca-Cola). More recently, railroads (Burlington Northern Santa Fe).

Paradigm AI authority James Altucher once wrote a book called Trade Like Warren Buffett. “The thing that stayed with me,” James recalls now, “wasn’t a strategy or a formula. It was a question he kept coming back to: Will this company still be here in 20 years?”

To Buffett’s mind, precious few tech companies met that test. 

“He bought Apple,” James says, “but he always described it as a consumer products bet — loyal customers, pricing power, one of the strongest brands on Earth. The same reason he bought Heinz ketchup.”

But then came Berkshire’s commitment this month to Google.

When Buffett handed off the reins as CEO to Greg Abel at year-end 2025, Berkshire already held a small position in Google, about $4.3 billion. Abel quickly tripled that position to $16.6 billion.

And then… when Google issued $80 billion in new shares to fund its AI data center buildout… Abel stumped up $10 billion of that total.

“Some read that as Abel going rogue, a new CEO making his mark,” James says. “But consider what it actually takes to get a $10 billion check out of Omaha. 

“Buffett remains chairman and the largest shareholder. A man who spent six decades watching technology booms from the sidelines doesn't sign off on something like this because a new CEO asked nicely.”

Like Apple, this is a tech investment Buffett can wrap his sensible Midwestern mind around. It’s no longer about squishy things like software; it’s about tangible stuff now, James says — “data centers, power grids, cooling systems. The kind of capital-intensive, durable infrastructure Buffett has always understood. 

“The moment AI became a construction problem, it became a Berkshire problem.”

Berkshire’s Google investment is only one data point demonstrating the AI buildout still has legs. James points to two more…

“SpaceX closed its IPO raising $85 billion — the largest public offering in history — with a significant portion earmarked for AI compute infrastructure. 

“Then Nvidia surprised the bond market with a $25 billion offering of its own. Nvidia's business prints cash and hadn't needed to borrow since 2021, so when it raised $25 billion in bonds without warning, the market's response was striking — investors put in orders for more than three times what was available.

“All told, nearly $200 billion was committed to AI infrastructure in less than a month. $85 billion from SpaceX's IPO. $10 billion from Berkshire toward Google's $80 billion AI buildout. $25 billion from Nvidia's bond raise.

“SpaceX and Nvidia are supposed to bet on this. That's who they are. Berkshire isn't. 

“When all three point at the same destination in the same month, Berkshire is the one that tells you something new, because it's the one that had no reason to move, and moved anyway.”

James’ bottom line: “A lot of investors have watched the AI buildout and wondered whether the spending was real or whether it would eventually slow down. $200 billion in a single month answered that question pretty definitively.”

Markets Today: Tech Corrects

Of course, even though the AI buildout is proceeding at a furious pace, tech stocks are going to have a washout day now and then — and today is one of them.

There’s no obvious catalyst. The Financial Times is reaching for “fears of rising U.S. interest rates and a recent plunge in SpaceX shares.” 

There was no hint of it coming yesterday other than a 1.3% pullback in the Nasdaq. But overnight South Korea’s stock market — dominated by chipmakers Samsung and SK Hynix — cratered 10% in a day. 

The sell-off spread westward to Europe and by early this morning Nasdaq futures were down 3%.

Paradigm trading pro Enrique Abeyta spotted this chart courtesy of Charlie Bilello, chief market strategist at the Creative Planning firm. “It shows how much semiconductor stocks have gone up recently.”

“Bilello points out that the semiconductor index SOX is +233.3% in the last 14 months. That is the most since it was up 233.9% back in early 2000. 

“Even if we are not at THE top, these stocks need to take a break, and looks like they are starting today.”

Checking our screens, the Nasdaq has trimmed its losses to about 1.5% on the day, but still well under 26,000. SpaceX sank briefly below its first-day trading price of $150 — but dip buyers have propelled it back to $163.

The S&P 500 is down 1%, slipping just below 7,400. The Dow, less dominated by tech, is in the green by about a quarter percent.

The selling has spread into precious metals — gold down 1.2% to $4,139. But silver’s getting positively pummeled — down three bucks and under $62 for the first time since December. Crypto is moribund, Bitcoin at $62,502 and Ethereum at $1,659.

Oil: The State of Play

OK, as near as we can tell, this is not indicative of wider stresses in the retail market for fuel.

Naturally, other people have taken this report and exaggerated it into wild claims of the state government decreeing a statewide cap on retail fuel purchases at $50. Not true.

But make no mistake, peace deal or no the supply situation is still tight. 

As mentioned here last week, the U.S. government’s Strategic Petroleum Reserve has been drained to levels last seen in 1983. And the tanks at the big private-sector terminal in Cushing, Oklahoma are approaching “operational minimums” beyond which there’s too much sludge mixed in with the oil and pipelines lose pressure.

And the situation in much of the rest of the world is even more dire.

Little wonder that last week Donald Trump said he reached a “memorandum of understanding” with Iran because otherwise “We run out of reserves in about four weeks,” running the risk of “a worldwide depression.”

And yet… traffic through the Strait of Hormuz continues to proceed at a fraction of its prewar levels. 

Independent monitors say 71 vessels — not all of them oil tankers — transited the strait between Friday and Sunday. Before the war, Hormuz accommodated well over 100 vessels per day.

A handful of “very large crude carriers” capable of carrying 2 million barrels have departed the Persian Gulf via the strait — and that’s a positive development. But precious few empty tankers are coming the other way to load up on new crude shipments. And don’t forget about the barnacles.

And so inventories continue to be drained… but U.S. oil futures are down again today on the expectation that supply chains will normalize any day now. At last check, we’re down 2% to $73.31, the lowest since the big ramp up just after the war began in early March.

Alan Greenspan, 1926–2026

Your editor could expend a lot of words on the passing of former Federal Reserve chair Alan Greenspan at age 100.

But Clint Russell of the Liberty Lockdown podcast is sparing me the trouble…

It’s interesting that even the corporate media had to distance themselves from the “Maestro” plaudits they gave Greenspan at the turn of the century. 

The first paragraph of The Wall Street Journal’s obit had to acknowledge that “the 2008–09 global financial crisis had recast his aura of technocratic competence.” The subhead of The New York Times’ article said “he favored market-friendly stances that would later come to be associated with destructive financial forces.”

Now they tell us…

Mailbag: A “New” Law and an Old TV Set

“What is the law Congress passed that's devastating to Roth IRAs AND 401(k) ACCOUNTS???” a reader writes with evident alarm — but with no further details for us to go on.

Every once in a while, we’ll get an inquiry like this out of the blue. It has nothing to do with anything we’ve addressed in these missives — at least not recently — but clearly the individual feels a certain urgency to the situation. If time allows, I can go down a rabbit hole and see what turns up.

Fortunately, this one’s pretty easy. 

Seems there’s a competing financial publisher — although it has a name that sounds like a public-policy think tank — issuing a dire warning about a “new law” that in fact was passed in 2019.

We’ve mentioned it now and then ourselves. It’s the SECURE Act — passed by a Democrat-controlled Congress and signed into law by Donald Trump. 

It made several changes to retirement plans, but the notable one for our purposes today is that it killed the so-called stretch IRA.

The way it used to work was you could bequeath an IRA to your kids… and if they wanted, they could “stretch” out the withdrawals over many, many years — potentially the rest of their lives — even as the nest egg would keep compounding tax-free.

But under the SECURE Act, your heirs have to clean out the account within 10 years. That way Uncle Sam collects his precious revenue much sooner. At the time of passage, congressional bean counters figured it would generate about $15.7 billion over 10 years.

The extent to which this move is “devastating” varies from family to family. (And to be clear, spouses are exempt.)

Nonspouse beneficiaries can structure those withdrawals however they want — a lump sum at any time, monthly or annual withdrawals spread evenly across all 10 years, whatever. 

But it’s gotta be done — and it can definitely vault your heirs into a higher tax bracket than was the case before 2020.

Unfair to people who made plans based on the old rules? Absolutely. Which underscores the fact the feds can change the rules and break their promises whenever they like.

“Congratulations on keeping balanced after reading all that stuff,” a reader writes after yesterday’s edition about how these daily dispatches come together.

That said, the picture of my work desk prompted one of our longtimers to write, “What the he*l is the CRT and probably analog TV there for?! News clips from 1998? Enjoy the splendor of 480i graphics? DVD playing? Pong?

“Thanks again for all your hard work (despite the prior millennium tech).”

Dave responds: Meh, it still works. I’ve got a little Roku box on top of it. It’s not as if I need to monitor Iran’s Press TV in glorious 4K resolution.

Actually, I’m not sure I’ve ever thrown away a CRT TV that’s still functional — there’s another one equipped with a Roku that’s within eyeshot of the home treadmill. Thrift!