Apple's largest $110 billion share repurchase program in history has raised questions from retail investors about whether it would be wise to continue to use cash to buy back stocks while iPhone sales continue to decline.

On Thursday local time, Apple released financial reports showing that iPhone sales in the first quarter fell 10% year on year, leading to a 4% drop in total revenue. At the same time, however, Apple announced that it will carry out an additional $110 billion in share repurchases, which is a 22% increase over the previous repurchase. Apple also raised its dividend by 4% to 25 cents per share. The buyback program brought Apple's stock price to its best day since the end of 2022.

However, after Apple announced the plan, Reddit user RequesAndWate, a community forum known as the “base camp for retail investors,” posted a post questioning: Why didn't Buffett object to Cook's high-premium repurchase of Apple shares?

This user compared Apple's current repurchase behavior to Coca Cola's similar practices during the internet bubble. The latter was later acknowledged as a mistake by Buffett.

Notably, not only retail investors, Berkshire Hathaway shareholders are beginning to worry about Buffett's investment in Apple. At the end of last year, Buffett reduced his Apple holdings, albeit by only about 1%.

Apple is still the largest public stock held by Berkshire, and it is also one of Buffett's most successful investments in his lifetime. Buffett has long stated that buying Apple was not about betting on technology, but on a company loved by customers. He sees user loyalty as Apple's greatest moat.

However, as Apple's performance continues to decline, Buffett may face such problems at the Berkshire shareholders' meeting to be held later:

Is the Apple Moat drying up? Especially as the tech giant faces increasing regulatory pressure.

Apple's total revenue declined in 5 of the past 6 quarters, while Cook expects the second quarter's revenue growth rate to be only in single digits. Even after experiencing a sharp rebound on Thursday, Apple's stock price has fallen 3.8% so far this year, compared to a 7.5% increase in the S&P 500 index.

iPhone sales continue to weaken, why doesn't Buffett oppose Apple's stock buyback?

Some people think Buffett might not want to publicly criticize Apple because it could hurt his own investment in Apple.

Others believe that stopping the buyback will indicate that Apple shares are too expensive, and shareholders will require the company to use cash in other ways.

Others believe that this strategy may be due to Buffett's suggestions. In an interview with the media in 2016, Cook said:

As I weighed the question of how to return cash to shareholders, I thought about who could give us pertinent advice without profit preferences? So I called Warren Buffett, and I thought he was the perfect fit.

Buffett once praised Apple's ability to return billions of dollars to shareholders every year through share buybacks and dividends.

By the end of 2023, Berkshire Hathaway owned about 6% of Apple's shares. At the time, the shares were worth 174 billion US dollars, accounting for about 40% of the group's total market value. This holding was about four times the size of Berkshire's second-largest publicly held bank of America. Berkshire has become Apple's second-largest shareholder, after Pioneer Group.

Betting on Apple paid off handsomely for Buffett. Buffett said in 2022 that the cost for Berkshire to hold Apple shares was only $31 billion. Since the beginning of 2016, Berkshire's investment has grown by nearly 620%.

According to calculations by investment firm Cheviot Value Management, Berkshire received an annualized return (including dividends) of more than 26% from Apple, exceeding the 12.9% increase in the S&P 500 over the same period.

Buffett's love for Apple wasn't based on technology for a long time. He saw how loyal users are to Apple products and sees the iPhone as an extraordinary product that allows customers to spend within the Apple ecosystem. And see user loyalty as Apple's moat.

Buffett said at last year's shareholders' meeting:

Apple's position on consumers is that they pay $1500 or whatever for a phone, and these people pay $35,000 to buy a second car.

If they had to choose between a second car and an iPhone, they would give up the second car!

However, the year-on-year decline in Apple's total revenue for five out of six quarters indicates that this moat is drying up?

Cook revealed that overall sales for the June quarter may grow at a lower single-digit percentage. Market expectations are US$83.23 billion. Apple's revenue for the second quarter of the natural year of 2023 fell 1% year-on-year to US$81.8 billion.

Berkshire shareholders have many concerns: weak sales, antitrust...

Analysts believe that Berkshire shareholders mainly have the following concerns about Buffett's massive investment in Apple shares:

Apple is currently facing various challenges such as falling stock prices, slowing sales in the Chinese market, and lagging artificial intelligence competition, which increases the risk of investing in Apple.

Apple's stock price is no longer cheap, and it's harder to find the right time to buy it than before.

Antitrust agencies in many European and American countries have launched investigations or lawsuits against Apple. Once convicted of a major violation, Apple may face hefty fines or even be required to make major changes to its business model, which will seriously affect its most profitable business revenue. Buffett has yet to publicly express his views on the regulatory hurdles.

Generally speaking, it is difficult for technology companies to maintain their dominant position for a long time, and Apple's current products may be replaced in 15 years.

Furthermore, Apple lacks physical assets as a safety cushion. The risk is high, and it is not in line with Buffett's consistent investment style. Previously, Buffett was generally cautious about technology stocks; investing in IBM caused losses.

Despite this, it is currently difficult for Berkshire to find a better investment channel than Apple to use its huge cash reserves. This is probably the main reason why Buffett is not selling Apple shares.