Warren Buffett's Berkshire Hathaway has reached a valuation of $1 trillion, becoming part of the exclusive group of the world's wealthiest companies.

Aug. 29, 2024, 10:26 a.m.

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Warren Buffett, the renowned American investor and philanthropist, celebrated his 94th birthday early, as his company, Berkshire Hathaway, reached a market valuation of $1 trillion on Wednesday. Buffett's birthday is on August 30th.

On Wednesday (August 28), shares of the Omaha-based conglomerate climbed as high as 0.8 percent, propelling its market capitalization above the $1 trillion mark for the first time. For those unfamiliar with financial terminology, market capitalization represents the total value of a company based on the combined market value of all its outstanding shares.

Advertisement “It’s a tribute to Mr Buffett and his management team, as ‘old economy’ businesses … are what built Berkshire. Yet, these businesses trade at relatively much lower valuations, versus tech companies which are not a major part of Berkshire’s business mix,” Andrew Kligerman, TD Cowen’s Berkshire analyst was quoted as saying to CNBC. “Moreover, Berkshire has achieved this through a conglomerate structure, a model that many view as ‘archaic,’ as corporations have increasingly moved to specialisation over the decades.”

This achievement not only marks an early birthday gift for Buffett but also places his company among the select few to cross the $1 trillion market cap threshold. Here's what we know.

Rise and rise of Berkshire Hathaway

Berkshire Hathaway, an American holding company headquartered in Omaha, has roots in two textile companies from Massachusetts: Hathaway Manufacturing Company (established in 1888) and Berkshire Cotton Manufacturing Company (established in 1889). Berkshire Cotton transitioned to Berkshire Fine Spinning Associates in 1929 and subsequently merged with Hathaway to form Berkshire Hathaway, Inc., in 1955.

In 1965, Warren Buffett and his investment firm acquired a controlling stake in the textile company. Over the subsequent two years, Buffett steered the company towards a different direction, focusing on insurance and investment activities.

Along with his long-time business partner, Charlie Munger, who joined Berkshire Hathaway in the 1970s, Buffett consistently focused on companies demonstrating stable and predictable long-term growth. As time progressed, Berkshire continued to make strategic investments in both familiar and new enterprises.

Advertisement Since 1965, Warren Buffett has dedicated his life to transforming Berkshire Hathaway from a struggling textile manufacturer into a sprawling business empire. File image/Reuters Today, the company holds significant stakes in renowned companies such as American Express, The Coca-Cola Company, Bank of America, and Apple, among others. Its diverse portfolio also includes Geico car insurance, BNSF Railway, Berkshire Hathaway Energy, Brooks running shoes, Dairy Queen ice cream, Ginsu knives, and the World Book encyclopedia, just to name a few.

On the day it surpassed the $1 trillion mark, Berkshire Hathaway's shares rose by 0.8 percent, reaching $696,502.02. Reports indicate that the company's stock has surged over 28 percent in 2024. Its diverse business portfolio generated a profit of $22.8 billion in the first half of the year, representing a 26 percent increase compared to the same period last year.

Kevin Heal, an analyst specializing in Berkshire Hathaway for Argus Research, told The New York Times that attaining a $1 trillion market valuation is a “significant milestone” and “a testament to the long-term performance” of both Berkshire and Buffett.

Joining the $1 trillion club

With this achievement, Buffett's conglomerate joins an elite group of companies boasting a 13-figure market value, including Apple, Nvidia, Alphabet, Microsoft, Amazon, and Meta. Elon Musk's Tesla previously crossed the $1 trillion threshold but subsequently experienced a decline due to a series of missed sales targets and other setbacks.

Berkshire Hathaway's attainment of the $1 trillion milestone is remarkable as it is the first non-technology company in the United States to achieve this coveted status.

Apple, the technology giant behind devices like the iMac and iPhone, became the first public company to reach a $1 trillion market valuation in 2018. This significant milestone was achieved 42 years after Apple's founding. It's noteworthy that US Steel was the first company to be valued at $1 billion in 1901, 117 years before Apple's landmark achievement.

In 2018, Amazon also joined the ranks of companies with a market capitalization exceeding $1 trillion. Three years later, in 2021, it joined Google's parent company, Alphabet, in reaching a $2 trillion valuation.

Interestingly, energy company PetroChina was cited as the world's first trillion-dollar company in 2007. However, this valuation was considered unreliable because only two percent of the company's shares were available for public trading.

Advertisement Two years after Apple crossed the $1 trillion threshold, Google's parent company, Alphabet, also achieved this remarkable valuation in January 2020.

In October 2021, Elon Musk's Tesla became one of the few companies to reach the $1 trillion valuation. It was the second fastest company to achieve this milestone, reaching it just over 12 years after its initial public offering in 2010. However, the company has since fallen out of that exclusive group.

Nvidia's surge in value to a $1 trillion company in 2023 was driven by the boom in Artificial Intelligence (AI). File image/Reuters Just last year, Nvidia's valuation reached $1 trillion, fueled by the rapid growth of Artificial Intelligence (AI). The chipmaker, founded in 1993 by Jensen Huang and two fellow engineers at a Denny’s in San Jose, California, initially focused on enhancing computer graphics. However, 16 years after its founding, Nvidia took a significant turn when Huang expanded the company's chip offerings beyond computer graphics.

Future of Berkshire Hathaway

While this milestone is a significant achievement for Buffett and his company, it's also crucial to consider Berkshire Hathaway's future. Buffett has designated his vice chairman, Greg Abel (61), as his successor to assume the role of chief executive.

Buffett stated, “Berkshire will continue to operate largely as it does now, regardless of leadership changes. We have the right individuals in place — the right directors, managers, and potential successors to those managers.”

With inputs from agencies