Berkshire beats Tesla in the valuation race as growth stocks sputter

After a $360 billion rout, Berkshire Hathaway Inc. has recently replaced Tesla Inc. as the fifth-largest business in the S&P 500 Index.

The market value of the Elon Musk-led electric vehicle manufacturer’s shares closed at $604 billion on Tuesday. Comparingly, it is almost $645 billion for Warren Buffett’s conglomerate. This contrast highlights the tremendous economic upheaval this year as formerly high-flying technology stocks continue to decline while industrial companies outperform.

Tesla, which until this April was a member of the $1 trillion club in terms of market capitalization. But it has subsequently experienced a new drop. Thank a hawkish Federal Reserve that is driving growth stocks down even more. As well as the criticism brought on by Musk’s erratic purchase of Twitter Inc., a social media powerhouse.

According to Catherine Faddis, a chief investment officer of Grace Capital, “Berkshire has branded itself as an American bedrock, a place to hide when one is uncertain about the future.”

The period of highly valued tech businesses with aggressive expansion plans is coming to an end, as shown on the US stock market. However, the relative durability of the industrial and consumption cycles is proving to be a benefit for steady and stable enterprises. In addition, rising interest rates are encouraging investors to buy up value firms that deliver consistent cash flows in the here and now.

46% decline in Tesla 

The benchmark S&P 500 Index and the heavily weighted Nasdaq 100 Index are both faring worse than the Dow Jones Industrial Average. Meanwhile, Tesla’s 46% decline this year is compared to Berkshire’s 2% decline.

Apple Inc., Microsoft Corp., Alphabet Inc., the parent company of Google, and Amazon Inc. have all had their stock prices drop by at least 20% so far in 2022.

The fact that Berkshire owns growth businesses like Apple and Microsoft. As well as, value equities like American Express make it challenging to evaluate the company in the current economic context, according to Faddis. The conglomerate has investments in privately held companies that operate in a variety of industries, including electric utilities, railroads, and insurance.


“This is a great representation of slow and steady wins the race in the current environment,” Arthur Hogan, chief market strategist at B. Riley Wealth, commented. “Value has underperformed growth for the better part of a decade, but the tide has certainly shifted this year and likely will continue into next year.”

Concerns over Musk’s takeover of Twitter and a broader tech sell-off have hit Tesla stock. In addition to profiting from increased interest rates, Berkshire benefited from the rush to haven assets.