The great story with Berkshire-HathawayThe update for the second quarter was that Warren Buffett increased his company’s stake in Apple (NASDAQ: AAPL)At the end of 2023, Berkshire owned more than 905 million shares of the iPhone maker, valued at over $174 billion. Today, it owns 400 million Apple shares, valued at around $90.7 billion.

Many investors may still be wondering why Buffett sold so much of Berkshire’s stake in Apple. But we can safely put one theory to rest. Was Buffett’s big sale of Apple a bet that Kamala Harris would beat Donald Trump? No.

Vice President Kamala Harris delivers remarks at the 40th annual virtual Black History Month celebration hosted by Congressman Steny Hoyer of Maryland, Saturday, Feb. 27, 2021, in the South Court Auditorium of the Eisenhower Executive Office Building at the White House. (Official White House Photo by Lawrence Jackson)

A simple answer

At Berkshire Hathaway’s annual shareholder meeting in May, Buffett spoke about Berkshire’s sales of Apple stock in the first quarter. He suggested that taxes were part of the motivation behind the sale. On paying taxes, the legendary investor said:

I don’t mind writing that check in the slightest, and I really hope you don’t mind that we’re doing it, after all America has done for all of you. And if I do it at 21% this year and we do it at a slightly higher percentage later, I don’t think you really mind that we sold a little bit of Apple this year.

Vice President Harris wants to raise the corporate tax rate from 21% to 28%. Did Buffett’s sale of Apple shares reflect this proposal from the Harris campaign? Not at all.

President Joe Biden did not drop out of the race for the Democratic presidential nomination until July 21, 2024, after the end of the second quarter. Harris also did not announce her plan to raise corporate tax rates until August. Buffett had already completed his first and second quarter sales of Apple before these developments. Even the presidential debate that led to pressure on Biden to abandon his pursuit of the 2024 nomination did not take place until June 27, and Buffett had likely already made most of his second quarter sales of Apple stock by then.

Buffett may be nicknamed “the Oracle of Omaha,” but even with his oracle powers, he would not have been able to predict the wild turn of events we have witnessed on the U.S. political front over the past six weeks.

Buffett’s bet on higher taxes

However, it’s possible that Buffett thought Biden would beat Trump and was worried about rising taxes if that happened. Most polls had the two men trailing closely in the first half of the year. Biden’s fiscal year 2025 budget proposal called for a corporate tax increase to 28% – the same level Harris later proposed.

Whatever Buffett’s views on the 2024 presidential campaign, he clearly expects U.S. corporate tax rates to rise in the future. Why? He’s an expert at analyzing financial reports, and the U.S. government’s financial reports don’t look very good.

The U.S. hasn’t had a budget surplus since 2001. The deficit in fiscal year 2023 was $1.7 trillion. The national debt is more than $35 trillion. Buffett probably looks at these numbers and knows that taxes – including corporate taxes – will almost certainly rise at some point.

Why Buffett might regret selling Apple

And yet, I think Buffett may regret selling so much of Berkshire’s stake in Apple. The timing of his big sale may not have been the best.

Apple is about to launch its first generative AI functionality. Some Wall Street analysts believe this will trigger an iPhone upgrade supercycle as consumers trade in their old iPhones for new ones that support the genAI features. If they’re right, Apple stock could see impressive gains over the next few years – regardless of who wins the presidential election in November.