Billionaire investor Warren Buffett has delivered many words of investing wisdom over the past few decades. Often, his most powerful have been the simplest.
For instance, in his 2021 letter to Berkshire Hathaway shareholders, Buffett wrote these four key words: “Never bet against America.”
Since the aptly-named Oracle of Omaha said that, an artificial intelligence (AI) revolution has unleashed a tidal wave of innovation and investment. Nvidia alone has added nearly $3trn to its market capitalisation — more than the entire London Stock Exchange!
Any investor who had heeded Buffett’s words four years ago and bought into an S&P 500 tracker would be up over 60% with dividends. For the tech-driven Nasdaq 100 index, the return is around 70%.
And even though Buffett has been selling stocks in recent quarters, he says that the majority of Berkshire Hathaway’s portfolio will remain invested in the US market.
US dominance
Imagine the following workday — not totally out of the ordinary — for someone in the UK.
They are woken up by the alarm on their Apple iPhone, before rising to make a cup of Costa-branded coffee (owned by Coca-Cola) and a bowl of cereal (probably a brand from Kellanova, commonly known as Kellogg’s).
Munching their flakes, they scroll through social media — Instagram, Facebook (both owned by Meta), and X. Then they go to work (perhaps in a Ford, Tesla, or Uber rideshare).
In the office, they check their emails (Google or Microsoft), and probably use software and platforms from Workday, Salesforce, and Microsoft. Perhaps a couple of Zoom meetings will take place.
After work, they go home and order some food (via Uber Eats). Then they unwind with Netflix and YouTube — owned by Alphabet (NASDAQ: GOOG) — before doing a bit of shopping on Amazon.
Before turning in, they book a relaxing weekend away (through Booking Holdings or Airbnb).
Meanwhile, every single card/online payment they’ve made all day (and every day) is processed by Visa or Mastercard.
A cheap tech stock
Four years ago, Buffett also said: “In its brief 232 years of existence…there has been no incubator for unleashing human potential like America.”
When I look ahead to future potential mega-trends (space exploration, quantum computing, virtual reality, etc), it is US-listed firms that are in pole position to dominate.
Take Alphabet. Best known as the parent of Google and YouTube, it also owns robotaxi firm Waymo. Last year, the company provided over 4m driverless taxi rides, averaging 150,000 trips per week. Waymo is moving into Austin and Texas in 2025, as well as Tokyo, then Miami in 2026.
Then there is quantum computing, which Google has been working on for over a decade. That could be an utterly transformative technology, driving the US stock market even higher.
Admittedly, Alphabet does face regulatory scrutiny and competitive threats to its search empire. But currently trading at just 21 times forward earnings, I think this US stock is worth considering.
Diversification
Beyond Alphabet, there’s a risk that many US stocks are currently overvalued (which probably explains why Buffett has been selling). So I think some allocation to other shares — cheaper UK ones, for example — is a wise move.
Longer term though, I still want exposure to the US market due to its record of innovation and growth. Many of its top firms also have massive international operations.
