Eight months ago, Elon Musk’s Tesla was worth twice the market value of Warren Buffett’s Berkshire Hathaway and is now worth less than $100 billion.
Tesla shares surged more than 12-fold in the first 18 months of the pandemic as retail investors gave the electric car company “meme stock” status, betting it would revolutionize the global energy and transportation industries.
Berkshire’s stock has only risen 60% in the same period, while Buffett is desperately hunting for bargains
bull market
, many of its stores have been hit by enforced closures and travel restrictions.
result? Tesla’s market cap surpassed Berkshire’s for the first time in November 2020, reaching a market cap of $1.3 trillion a year later — roughly double Berkshire’s $650 billion
market value
At that time.
However, Tesla shares have since plunged 45%, giving the company a market value of $707 billion as of Friday’s close. Meanwhile, Berkshire’s “B” shares edged down 4% over the same period, bringing Berkshire’s market value down to $611 billion.
As a result, the market cap gap between the two companies has now narrowed to about $95 billion, with Berkshire Hathaway even surpassing Tesla at one point in late May. The contrast in their fortunes reflects the brutality of the tech selloff and the resilience of value stocks like Berkshire.
Tesla’s decline underscores how much inflation and rising interest rates can hurt growth companies. When prices surge today, borrowing becomes more expensive and yields on safer assets like bonds rise, investors place less emphasis on possible future income streams.
Meanwhile, Berkshire stock is likely to hold firm as the company’s valuation is far less aggressive. The company generated $32 billion in pretax income from its operations last year, and investors are hoping Buffett will take advantage of the market downturn. (Berkshire spent a net $41 billion on stock purchases in the first quarter and invested nearly $2 billion in Occidental in recent weeks.)
Tesla shares are likely to rise again, but momentum now appears to be shifting to Berkshire as investors seek a safe haven from market volatility and support Buffett to complete some lucrative deals and buy quality stocks at a discount.
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