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Tesla has surged past $525 billion in market value and could soon overtake Warren Buffett's Berkshire Hathaway. Here's why that's astounding

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Warren Buffett and Elon Musk Warren Buffett (left) and Elon Musk (right)

  • Tesla’s market capitalization soared past $525 billion on Tuesday, leaving it within striking distance of the $549 billion market cap of Warren Buffett’s Berkshire Hathaway.
  • Shares in Elon Musk’s electric-vehicle company have rocketed up more than 500% this year, while Berkshire stock has only risen 2.4%.
  • The similarity in market caps is surprising, given Berkshire earned $255 billion in revenue last year, more than 10 times Tesla’s $25 billion.
  • Buffett’s company also had enough cash at the end of March to buy Tesla outright, as the automaker’s market cap was below $100 billion at the time.
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Tesla surged past $525 billion in market capitalization on Tuesday, leaving it less than 5% behind Warren Buffett’s Berkshire Hathaway, which hit a record $549 billion market cap at the close of trading.

Elon Musk’s electric-vehicle company climbed as high as $530 billion in market value on Tuesday, signaling it could overtake the famed investor’s conglomerate within days.

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The shrinking gap between the companies’ market caps primarily reflects Tesla’s stock price skyrocketing more than 500% since the start of this year. Its shares traded at less than a tenth of their current price as recently as October 2019.

In contrast, Berkshire’s shares have only climbed about 2.4% this year, trailing a 4% gain for the benchmark Dow Jones index over the same period.

The proximity of Tesla and Berkshire’s market caps is striking given the dramatic differences in their scale and financial strength.

Berkshire owns scores of businesses including See’s Candies, Geico, Precision Castparts, and the Burlington Northern railway that collectively employ more than 390,000 people.

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It also boasts a roughly $230 billion equity portfolio that includes more than $100 billion worth of Apple stock and billion-dollar stakes in American Express, Bank of America, Coca-Cola, and other blue-chip companies.

Buffett’s company earned $255 billion in revenue and booked $73 billion in investment gains last year, fueling $81 billion in net income. Moreover, it held $137 billion in cash and short-term investments at the end of March — enough to buy Tesla in its entirety at the time, as its market value had tumbled below $100 billion during the coronavirus crash.

Meanwhile, Tesla had about 48,000 full-time workers last year, less than an eighth of Berkshire’s workforce. It also generated about $25 billion in sales — a tenth of Berkshire’s revenue — and posted a $900 million net loss. Musk’s company also had only $6.6 billion in net assets last year, less than 1/60th of Berkshire’s $425 billion.

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Tesla investors are valuing the automaker at 21 times last year’s sales, because they’re betting on phenomenal growth, wagering it can dominate multiple markets with its technology, and expect it to become a global powerhouse.

Yet it’s still surprising that Tesla, at its current stage of growth, is already threatening to become more valuable than one of the world’s largest and most successful companies.

Here’s a chart showing how quickly Tesla has caught up to Berkshire in terms of market value:

BRKTSLA_Chart