Al Root

Monday, the value of Warren Buffett's Berkshire Hathaway passed Elon Musk's Tesla.

The move doesn't signal anything about the economy, the insurance business versus electric vehicles, or either of the two men as managers -- both have had many successes. It does, however, show that earnings always matter in the stock market.

Berkshire Hathaway stock soared 4.1% on Monday, bringing its market capitalization to about $1.07 trillion, according to FactSet. Tesla stock dropped 2.2%, leaving shares with a market value of $1.04 trillion.

The change made Berkshire Hathaway the seventh most valuable company in the S&P 500, surpassing Tesla, which is now in eighth place. Berkshire Hathaway, of course, has been more valuable than Tesla in the past. However, Tesla pulled ahead decisively after the Nov. 5 presidential election.

Earnings are responsible for the recent flip-flop. Saturday, Berkshire Hathaway reported some $17 billion in fourth-quarter pretax profit, a quarterly record. Wall Street was looking for closer to $12 billion. It's hard to call it a "beat," though. Berkshire Hathaway is an odd stock. For starters, it reports on Saturdays. What's more, only six analysts are covering the company. That's incredibly few for a company the size of Berkshire Hathaway. Tesla has almost 60 analysts calculating quarterly estimates.

Still, record profits are a positive. So was cash. Berkshire Hathaway ended 2024 with a record $334 billion, up from $325 billion at the end of the third quarter.

Tesla's fourth-quarter report wasn't as strong. The company reported earnings per share of 73 cents. Wall Street was looking for 78 cents. Moreover, Tesla's fourth-quarter numbers included roughly 20 cents for gains from its bitcoin holdings.

Coming into Tuesday trading, Tesla stock was down about 15% since its Jan. 29 earnings report. Wall Street has cut its estimates for 2025 earnings by about 12% to $2.90 a share from $3.30 over that same span.

Tesla investors remain optimistic about future earnings driven by new EVs, self-driving cars, and robots trained with artificial intelligence. The recent performance of Berkshire Hathaway and Tesla stock, however, shows investors still pay attention to current earnings as well.

The S&P 500's trillion-dollar stocks are Apple, Nvidia, Microsoft, Amazon.com, Alphabet, Meta Platforms, Berkshire, and Tesla. Tesla stock has to stay above roughly $311 to maintain a trillion-dollar valuation. Broadcom has been trillion-dollar member, but isn't at the moment.

The trillion-dollar club is worth a combined $18.2 trillion, or about 34% of the total market value of the S&P 500. Including Broadcom, the numbers go to about $19.2 trillion and 36%, respectively.

Most of those stocks have something to do with AI. It's nice to have Berkshire Hathaway in there -- if only for diversification.

Write to Al Root at allen.root@dowjones.com

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February 25, 2025 09:00 ET (14:00 GMT)

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