For the majority of his career, Warren Buffett avoided buying stock in tech companies, saying he doesn’t understand them well enough to predict where they’ll be in the future. He changes course, however, when he invests in IBM in 2011—and Apple in 2016.
For years, Buffett refuses to invest in tech companies, saying he likes to stay away from businesses that are likely to undergo significant change. He tells shareholders in 1996 that he prefers instead to "bet on the simple things."
By 1999, the mania for stocks reaches the point where companies with a plan involving the World Wide Web, but no prospect of earnings, are more valued on Wall Street than many profitable, established "brick and mortar" companies.
Twelve years later, well after the bursting of the internet bubble, Buffett surprises the investment world by acquiring almost $11 billion worth of IBM stock. During an appearance on CNBC's "Squawk Box," he says reading IBM's annual report helped him see the company differently.
Buffett's IBM investment sparks speculation he might look at other tech companies. But Buffett tells shareholders that while Google and Apple are "extraordinary companies," he wouldn't want to invest in them.
Almost five years after diving into IBM, the stock has dropped significantly. (At the end of 2015, Berkshire's position are down about $2.6 billion in market value.) On CNBC's "Squawk Box" in February, 2016, Buffett concedes he might have made a mistake.
As the 2017 annual meeting is being held in May, Google's market value is above $650 billion and Amazon is approaching $450 billion. Looking back, Buffett and Munger admit that picking internet winners may not have been as hard as they thought.
Despite IBM's modestly disappointing performance, Buffett has been making enormous purchases of Apple stock. Around the time of this meeting, Berkshire owns almost $19 billion worth of the company's shares. Buffett, however, isn't ready to label it as purely a "tech" stock.
By early 2018, Warren Buffett has substantially increased Berkshire's holdings in Apple—and sold off most of its IBM stock. On CNBC's "Squawk Box," he admits he "was wrong" when he bought IBM—but he's more confident in Apple and the psychological hold the company has over its consumers.