💸 Buffett made it rain

What’s going on here?

Warren Buffett might’ve said it won’t be long until he hands down his CEO status – but if Berkshire Hathaway’s latest results are anything to go by, the Oracle of Omaha’s still got it.

What does this mean?

Berkshire made 71% more pre-tax profit last quarter than a year earlier, landing at an imposing $14.5 billion. That’s largely thanks to a serious bump in income at its insurance division. Meanwhile, still-high interest rates worked their magic on the conglomerate’s cash pile – and there was plenty to play with. Berkshire has $334 billion of it sitting idle at the moment.

Why should I care?

For markets: Even Buffett’s fortress isn’t fireproof.

Buffett’s not just hoarding Berkshire’s dollars: he’s selling its US stocks in favor of more cash. The Oracle of Omaha reduced the firm’s holdings by nearly a quarter over the last year. And he won’t even touch his own lot: Buffett’s refusing to buy back Berkshire’s stocks, signaling to the market that he thinks they’re too expensive. Add that all together, and Buffett’s strategy could indicate that he doesn’t think the economy’s as strong as the stock market suggests. Then again, over half of Berkshire’s companies reported falling profit last year – and its insurance business is expected to pay out $1.3 billion in relation to the LA wildfires.

Zooming out: Maybe America’s the problem.

Buffett might be holding back in the US, but he’s going for second helpings in Japan. Despite Berkshire selling more stocks than it bought for nine straight quarters, the firm’s still banking on Japan’s five biggest trading houses: Mitsubishi, Mitsui, Itochu, Sumitomo, and Marubeni. Going forward, having invested in the fivesome since 2019, Berkshire now has the green light from each of the companies to increase its stakes past their previous 10% caps. And Buffett believes Berkshire will hold larger positions in the five “for many decades”.

What’s going on here?

Microsoft has reportedly begun canceling leases on US data centers, potentially needing less capacity than it originally thought.

What does this mean?

After spending a year hoarding AI data center capacity, Microsoft seems to be into “less is more” all of a sudden. The Magnificent Seven firm has backed out of some data center deals, let other ones expire, and stopped converting “pre-leases” into actual leases – all moves that suggest it’s looking to tone down its AI expansion.

Investors have a reason to be jittery here. See, when Meta’s metaverse spending got out of hand, it wriggled out of data center deals too – so this could indicate overspending on Microsoft’s part. For now, though, the firm isn’t conducting an all-out retreat: it’s still planning to shovel $80 billion into AI infrastructure this year. But scaling back at such an early stage will undoubtedly raise eyebrows. AI has been the market’s golden goose – and if one of its biggest backers is rethinking capacity, folks could start wondering if the boom is overblown.

Why should I care?

For markets: When Microsoft taps the brakes, Alibaba floors it.

Alibaba is going all-in on AI, throwing a stunning $53 billion at infrastructure to transform itself from an e-commerce giant into an AI powerhouse. Being a slow mover has its perks: Alibaba can learn from Microsoft’s missteps and skip some trial-and-error costs. But if AI demand is cooling, even a savvy plan could backfire.

The bigger picture: Groundbreaking tech, meet ground-shaking tensions.

The US has been rolling out some tough economic restrictions, many of which are aimed at the world’s second-biggest economy. There’s the tighter scrutiny on Chinese investment in key US sectors, the brand-new fees on Chinese-built ships, and the country’s pressure on Mexico to slap tariffs on Chinese goods. And when tech and trade collide, expect volatility. AI dominance isn’t just about who builds what: it’s about who controls the supply chains.