Social media has been filled with rumors that either Apple has bought bitcoin or that the iPhone maker should launch its own cryptocurrency. What would happen if Apple buys bitcoin? Would Warren Buffett support the move?
Buffett’s conglomerate, Berkshire Hathaway, is the second-largest shareholder of Apple. Both Buffett and vice-chair Charlie Munger have a very pessimistic view of cryptocurrencies. On multiple occasions, they've lambasted bitcoin and other digital assets.
Has Apple bought bitcoin?
So far, the rumors of Apple buying bitcoin are unsubstantiated. The company, which has a massive cash pile of almost $200 billion, generates operating cash flow every quarter. As it doesn't need so much cash for its business, it spends the money on share repurchases.
For instance, in fiscal 2021's third quarter, Apple generated operating cash flow of $21 billion and returned $29 billion to stockholders in the form of dividends and repurchases.
Will Apple ever buy bitcoin?
It would be surprising if Apple buys bitcoin. The company has been very conservative with cash, and in the absence of other lucrative investment opportunities, it opts for massive buybacks.
While Tesla can get away with investing $1.5 billion in bitcoin because of lower yields elsewhere, Apple might not be able to escape scrutiny if it invests in cryptocurrencies—especially Buffett's.
Generally, Buffett hasn’t interfered in the companies Berkshire Hathaway invests in. In fact, some, like Jim Cramer, have suggested that he hasn't been critical enough. While Buffett has sold most of Wells Fargo's shares, he continues to hold Coca-Cola and Kraft-Heinz despite their underwhelming performance.
Buffett’s views on bitcoin are no secret: he's called a “rat poison squared.” Likewise, Munger believes that cryptocurrencies have no utility but as a payment mechanism for criminals. Therefore, it's likely Apple will use its $200 billion cash pile for either acquisitions or share repurchases, like Buffett. The Oracle of Omaha hasn’t been able to identify his “elephant” for over two years now and has instead been repurchasing shares.
Apple versus Elon Musk
Another factor to consider would be the subtle rivalry between Tesla and Apple. Musk has been critical of Apple on more than one occasion. Given Apple's rumored venture into Tesla’s territory of electric vehicles, the company wouldn’t want to be associated with a cryptocurrency associated with Musk. While Musk has had some infamous spats with bitcoin, he remains among the cryptocurrency's major backers.
Will Apple launch its own cryptocurrency instead?
In a report, RBC Capital Markets stated that Apple should launch its own crypto exchange. It argued that the iPhone maker could generate an additional $40 billion in annual revenue (or 11 percent of Apple’s expected revenue in this fiscal year) if it were to get into cryptocurrencies.
Apple's interest in financial services is clear—it has a credit card with Goldman Sachs and is reportedly planning a foray into the BNPL (buy-now-pay-later) market. Although some would say it's unlikely Apple would get into cryptocurrency, it's not implausible that the futuristic company would be involved in what others see as the future of finance.