Here’s Why Warren Buffett Mostly Avoids Tech Stocks
The technology industry is a prime example within the stock market, where certainty is in short supply. The Internet transformed the way we live our daily lives and paved the way for new goods and services, but it has been painful for some investors venturing outside their circle of competence. This was most evident during the dot-com bubble, a portfolio slayer that kept Buffett safely on the sidelines. Today, uncertainty among well-known tech names still remain.
Intel (NASDAQ:INTC), the world’s largest semiconductor chip maker, has faced several challenges in recent years due to mobile computing gaining more popularity than personal computers. Last week, the company confirmed plans to reduce its workforce by more than 5,000 jobs this year. Other former tech giants, such as Hewlett-Packard (NYSE:HPQ) and Dell, are also in the process of restructuring their business operations due to their economic moats running low.
Retailers dependent on the technology industry have also been plagued with a great deal of uncertainty recently. Shares of Best Buy (NYSE:BBY) plunged 35 percent in only two days last week after the retailer reported disappointing holiday sales and a lower-than-expected margin forecast. Shares of GameStop (NYSE:GME), the world’s largest video game retailer, fell 20 percent in a single trading day on similar concerns.