Elon Musk's Tesla blew past Warren Buffett's Berkshire Hathaway in market value during the pandemic. Now it's less than $100 billion ahead.
- Warren Buffett's Berkshire Hathaway trails Tesla in market capitalization by less than $100 billion.
- Tesla blew past Berkshire in market value in November 2020, and was worth twice as much last year.
Elon Musk's Tesla, which commanded twice the market value of Warren Buffett's Berkshire Hathaway eight months ago, is now worth less than $100 billion more.
Tesla shares skyrocketed more than 12-fold during the first 18 months of the pandemic, as retail investors awarded "meme stock" status to the electric-vehicle company, and wagered it would revolutionize global energy and transportation.
Berkshire shares gained a comparatively modest 60% over the same period, as Buffett struggled to find bargains in a breathless bull market, and many of his businesses were hit by forced closures and travel restrictions.
The upshot? Tesla exploded past Berkshire in market value for the first time in November 2020, and notched a $1.3 trillion market capitalization a year later — roughly double Berkshire's $650 billion market cap at the time.
However, Tesla shares have plunged by 45% since then, slashing the company's market value to $707 billion as of Friday's close. Meanwhile, Berkshire's "B" shares have slid by a modest 4% over the same period, trimming Berkshire's market cap to $611 billion.
As a result, the gap in market cap between the two companies has shrunk to about $95 billion today, and Berkshire even briefly overtook Tesla in late May. The contrast in the pair's fortunes reflects the brutality of the tech sell-off, and the resilience of value stocks such as Berkshire.
Tesla's stock-price decline underscores how rampant inflation and rising interest rates can be especially damaging to growth companies. Investors place less value on prospective future earnings streams when prices are jumping today, borrowing is getting more expensive, and yields are rising on safer assets such as bonds.
Meanwhile, Berkshire stock has likely held up because the company's valuation is far less aggressive. It generated $32 billion in pre-tax profits from its operating businesses last year, and investors are hoping that Buffett will capitalize on the market downturn. (Berkshire spent a net $41 billion of equity purchases in the first quarter, and has invested close to $2 billion in Occidental Petroleum in recent weeks.)
Tesla shares could well soar again, but for now it seems the momentum is shifting towards Berkshire, as investors seek a haven from the market turmoil, and back Buffett to strike some lucrative deals and buy high-quality stocks at a discount.
Here's a chart tracking Tesla and Berkshire's market caps over the past three years, courtesy of Sentieo, a financial-research site:
