Jan 01, 2025 03:18 PM IST
Chamath Palihapitiya wrote that a handful of tech stocks have become so valuable that the S&P 500 index is a concentrated bet on those risky businesses.
Billionaire investor Warren Buffett preaches that the best option for most people is to invest in a low-fee S&P 500 index fund and hold it long-term, but Chamath Palihapitiya, a Sri Lankan-born Canadian venture capitalist, disagrees.
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Palihapitiya, who is also a cohost of the “All-In” podcast, wrote in a post on X (formerly Twitter) that a handful of tech stocks have become so valuable that owning the S&P 500 index, which is based on market capitalisation is more of a concentrated bet on those risky businesses rather than a bet on the market as a whole.
“This needs to be fixed or it will end in disaster,” he wrote, in reaction to a chart shared by Kevin Gordon, a senior investment strategist at Charles Schwab, which showed that the 10 most valuable S&P 500 stocks made for 39.9% of the index’s total capitalisation as on December 20.
These include Apple, Nvidia, Microsoft, Alphabet, Amazon, Meta, Tesla, Broadcom, Berkshire Hathaway, and Walmart, all collectively worth around $21 trillion, a little less than half of the index’s $50 trillion market cap.
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He added that this lack of diversification means if Big Tech stocks take a hit, investors would suffer huge losses.
On top of this, Buffett himself has mostly avoided tech stocks throughout his career, citing that they tend to be expensive and that he lacks expertise in tech, but Apple alone is Berkshire’s largest position for most of the decade.
However, it is also important to know that Palihapitiya himself has seen criticism for promoting high-risk special purpose acquisition deals, or SPACs, during the pandemic, as well as for showing little remorse when their value fell, according to a Business Insider report.
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Berkshire Hathaway, Buffet’s investment firm is however, quite diversified in general, owning billion dollar stakes in Coca-Cola and Bank of America, along with a slew of other businesses.
Warren Buffett is currently the 10th richest person in the world with a net worth of $142 billion, according to the Bloomberg Billionaires Index which also showed that his wealth has climbed $22.2 billion year-to-date.
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