Apple's iPhone 16 Launch and Warren Buffett's AI Investment Strategy

With the Launch of iPhone 16, How Are Billionaires Investing in Apple Stock? | The Motley Fool

It's been less than week since Apple's (AAPL 0.12%) iPhone 16 hit the shelves and opinions about the new device are already quite mixed. Dan Ives of Wedbush Securities believes demand for the new iPhone will create a "supercycle" event for Apple, leading to some much-needed acceleration across the company's revenue base. Meanwhile, other pundits suggest that even though the iPhone 16 comes with some impressive specs, demand forecasts may be exaggerated. How have billionaire investors Warren Buffett, David Shaw, and Steven Cohen been investing in Apple as of late? Let's explore some moves from Wall Street's most sophisticated personalities and assess if Apple is a good opportunity for you right now. Warren Buffett has led investment management firm Berkshire Hathaway since the mid-1960s. Buffett's investment philosophies have helped turn Berkshire into the world's largest publicly traded financial services firm -- currently worth about $980 billion. Yet despite its decades-long track record of success, Berkshire's high-profile investment in Apple didn't enter the picture until 2016. Let's examine some recent activity from Berkshire and its position in Apple. According to its most recent 13F filing, Berkshire reduced its stake in Apple by nearly half during the second quarter -- offloading almost 400 million shares. This move followed a sizable sale of Apple stock from earlier this year, during the first quarter. Considering both the iPhone 16 launch and Apple's moves regarding new artificial intelligence (AI) services have been at the center of the bull thesis for some time, why would Buffett trim his stake with both of these catalysts looming on the horizon? I see a couple of drivers that likely influenced the decision. First, Buffett is notorious for investing in blue chip -- almost mundane -- companies. Some of his prominent positions include the likes of Coca-Cola and Bank of America. Investing in technology businesses such as Apple is more of an anomaly for Buffett. Right now, AI is the primary catalyst fueling the technology sector at large. In my opinion, Buffett might not be as compelled by the prospects of AI as other investors. Hence, trimming his Apple position and reinvesting the profits into safer vehicles such as Treasury bills is tough to argue with. Moreover, even after reducing his Apple stake significantly, the company still represents the biggest position in Berkshire's portfolio. This means that if the iPhone 16 and new AI-powered services ignite some newfound growth, Berkshire still stands to benefit given its remaining exposure to Apple stock. David Shaw is the founder of hedge fund D. E. Shaw. Last quarter, the fund sold 4.8 million shares of Apple -- reducing its stake by roughly 33%. Similar to Buffett, selling Apple stock amid some important product launches may be a head-scratcher on the surface. But a closer look at D. E. Shaw's entire 13F filing could shed some light into its portfolio management strategy. In addition to Apple, D. E. Shaw also reduced positions in other AI stocks including Microsoft, Nvidia, Meta Platforms, Tesla, Alphabet, and Amazon. Along with Apple, these megacap tech companies are collectively referred to as the "Magnificent Seven," and are broadly seen as barometers on the overall health of the AI industry. The chart below illustrates the return of the Magnificent Seven stocks from Jan. 1 through June 30. Although I cannot say for certain when D. E. Shaw sold stock during the second quarter, it's fair to say that the fund has benefited from overall bullish movements among the Magnificent Seven stocks (with the exception of Tesla through this time period). With some calling AI a bubble, changes to monetary policy that were not yet known during the second quarter, and broader economic concerns around inflation that directly impact demand for pricey items such as an iPhone, who can blame D. E. Shaw for taking some money off the table after outsize run-ups in big tech stocks? This idea holds particular importance with Apple. The company's growth has been inconsistent for over a year now, and yet the stock gained 9% during the first half of the year. Taking some gains in a company that isn't growing and whose next catalysts aren't guaranteed seems like a prudent thing to do. Like Buffett, Shaw still remains exposed to Apple and is positioned to reap the rewards of the iPhone 16, as well as the company's long-awaited foray into AI. Last on my list is Steven Cohen, the founder of Point72 Asset Management. During the second quarter the fund initiated a position in Apple, scooping up 1.6 million shares. In early June Apple announced a strategic partnership with ChatGPT maker OpenAI. The deal was well received, as up until that point Apple's AI vision was looking pretty mysterious -- unlike many of its peers. Furthermore, it's possible that Point72 was more optimistic about the macroeconomy and was optimistic about the possibility of rate cuts from the Federal Reserve. The combination of a deal with OpenAI, the anticipation of the iPhone 16 launch, and an improving economic picture may have compelled Cohen's Point72 enough to buy into Apple's next growth narrative. I think all of these factors could have influenced Point72's purchase of Apple stock, and I would not be surprised if Cohen's fund keeps its allocation just as D. E. Shaw and Buffett's Berkshire Hathaway did. The big idea here is that each of the investors I've explored still owns Apple stock, despite various levels of buying and selling in the stock. I think investors who are looking for exposure to AI could see Apple as a unique opportunity right now. Although many of its big tech counterparts have already made waves in the AI realm, Apple's chapter in the story appears to just be starting, making it a particularly interesting stock to buy at the moment.

Meet Warren Buffett's Top Artificial Intelligence (AI) Stock, Which Has 32% Upside According to Dan Ives | The Motley Fool

Apple comprises roughly 30% of Warren Buffett's Berkshire Hathaway portfolio. Helping build Berkshire Hathaway into a near-trillion-dollar enterprise and co-founding the Giving Pledge charity are just a couple of things Warren Buffett is known for. Despite his prolific career, one thing that Buffett is not really known to be is a technology investor. In fact, many of his most famous and lucrative investments came from simple businesses across financial services and consumer goods. However, Buffett has been a staunch supporter of Apple (AAPL 0.12%) for almost a decade. Today, Apple represents Berkshire's largest position -- comprising roughly 30% of its portfolio. Although Apple stock has posted significant gains since Berkshire's initial purchase in 2016, some on Wall Street are calling for even further share price appreciation. In particular, Dan Ives of Wedbush Securities has a $300 price target on Apple stock -- implying 32% upside as of the market close on Sept. 24. Let's explore some catalysts that could fuel Apple stock and assess if there is a good opportunity to buy the stock now. For the last couple of years, high inflation and rising interest rates have daunted the macroeconomy in the U.S. Moreover, as a global enterprise, Apple has also not been immune to some of the factors slowing down other major geographic regions such as China. In turn, consumers and businesses have tightened budgets and spending habits have changed. People have been more cost-conscious over the last couple of years, opting to forgo expensive new iPhones or MacBooks. However, as inflation levels show signs of decelerating and interest rate tapering from the Federal Reserve begins, consumer purchasing power should start to strengthen. For the last few years, several megacap technology companies have made big splashes in the artificial intelligence (AI) arena. Apple has not been one of these companies. However, during a recent segment on CNBC, Dan Ives proclaimed that Apple is about to enter a "renaissance." I agree. For starters, Apple's new iPhone 16 hit the shelves last week. As I alluded to above, a lot of users in the Apple ecosystem have not been upgrading their devices over the last couple of years. But with signs of economic improvement on the horizon, I think Apple is set to recognize some deferred demand in its new hardware. Furthermore, I think Apple's recent collaboration with OpenAI will bring two additional catalysts to the company. First, integrating OpenAI's capabilities into its products has helped spur the creation of Apple Intelligence. As the company begins to roll out new AI-powered services, I think consumers will be inspired to upgrade and purchase Apple's new line of products. Moreover, Ives is predicting that the relationship with OpenAI will be just the first in a series of AI-inspired partnerships for Apple. In particular, Ives is calling for a deal between Apple and Baidu. Baidu can be thought of as the Google-equivalent in China. Such a deal could help reignite demand for Apple products overseas, particularly in China. Whether or not a specific deal with Baidu comes to fruition is less important to me. At a higher level, I am aligned with Ives' thinking that OpenAI will be just one in a series of partnerships that Apple strikes as it finally begins penetrating the AI market. All of these factors could create a tailwind for Apple, which Ives calls a "supercycle." In my eyes, Apple's entrance into the AI realm could represent a pivotal growth arc for the company. One drawback with Apple stock is that it is pricey at the moment. Right now, Apple's forward price-to-earnings (P/E) ratio of 33.7 sits at a significant premium to the S&P 500's forward P/E of 22.9. Furthermore, forward P/E trends for the S&P 500 have been normalizing for some time. By contrast, Apple has been experiencing notable valuation expansion. I bring all of this up because investors should understand that Apple stock has become more expensive, despite its delayed entrance into the technology industry's newest frontier: AI. There is a fair argument to be made that some of the AI-driven growth is already baked into Apple's share price. Despite this narrative, I think the company's growth from the new iPhone and from Apple Intelligence more broadly is too tough to call one way or the other right now. For these reasons, I would not underestimate Apple's ability to command reignited growth thanks to a resilient and restored consumer. In the long run, I still see Apple as a compelling opportunity and think shares are worth a close look right now.