By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
The panel's net takeaway is that American Express (AXP) faces significant cyclical risks and potential headwinds, despite its closed-loop advantages and strong credit quality. The panelists agree that AXP's valuation may not fully reflect these risks.
Risk: Recession sensitivity and potential compression of loan growth, payment volumes, and merchant discounts, pressuring earnings.
Opportunity: AXP's closed-loop model and high-spend customer base create real moat advantages.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
American Express is the second-largest stock in Berkshire Hathaway's portfolio.
The conglomerate has owned the credit card payment company for decades.
American Express benefits from a strong brand that attracts high-spend customers.
Every quarter, the Securities and Exchange Commission (SEC) requires institutional investors with over $100 million in assets to list exactly what U.S. publicly traded stocks they own, how many shares they hold, and the total dollar amount of those positions.
One company that investors follow religiously is Berkshire Hathaway (NYSE: BRKA)(NYSE: BRKB). Investors have finally caught a glimpse of what Berkshire bought and sold during the first quarter. The conglomerate trimmed several stocks from its portfolio, but its top three holdings remained steady: Apple (NASDAQ: AAPL), American Express (NYSE: AXP), and Coca-Cola (NYSE: KO).
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
American Express is a quintessential Warren Buffett investment that Berkshire Hathaway has owned for decades, and there's one major reason why it remains a top holding after all these years.
In Q1, Berkshire Hathaway sold its entire stake in both Visa and Mastercard but continued to hold American Express.
What separates American Express from its competitors is that it operates a closed-loop payments network, meaning it is the card issuer and network processor, and also holds and services its own credit card loans. This enables American Express to earn both network fees from transactions and interest income on its loans.
Another advantage for American Express is its successful branding targeted toward high-net-worth, high-spend individuals. The company positions itself as a luxury card and offers customers rewards and benefits to reflect this. Benefits like Centurion Lounges, concierge services, and early access to ticket sales reinforce its status as a premium brand, rather than just a payment method.
As a result, American Express cardholders spend significantly more per transaction than users of other networks. In 2024, the average Amex transaction was $150, compared to roughly $94 for Mastercard and $91 for Visa.
Because Amex brings high-spending customers to the table, merchants are often willing to pay higher merchant discount rates to access its customer base. On top of that, it generates substantial revenue from annual card fees, like its $695 Platinum Card.
Another benefit of this customer base is that it helps the company maintain good credit quality, allowing it to better navigate recessionary or inflationary periods. In Q1, its net charge-off rate was 2.3%. In comparison, Capital One, another major closed-loop payment network operator after its acquisition of Discover last year, reported a charge-off rate of 3.7% on its credit cards.
American Express has been a staple in Berkshire Hathaway's portfolio since the 1990s. The company boasts an incredibly strong moat with its branding, giving it a loyal premium customer base that spends frequently and is more resilient during economic downturns.
The credit card company has consistently rewarded shareholders with dividends and stock buybacks, which have helped grow its earnings per share. For investors seeking diversification from the financial sector and stable long-term growth, American Express remains a top pick today.
Before you buy stock in American Express, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and American Express wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $477,813! Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,320,088!
Now, it’s worth noting Stock Advisor’s total average return is 986% — a market-crushing outperformance compared to 208% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
**Stock Advisor returns as of May 23, 2026. *
American Express is an advertising partner of Motley Fool Money. Courtney Carlsen has positions in American Express, Apple, and Berkshire Hathaway. The Motley Fool has positions in and recommends American Express, Apple, Berkshire Hathaway, Mastercard, and Visa. The Motley Fool recommends Capital One Financial. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"AXP's lending book and high fees create more downside in a consumer slowdown than the article acknowledges."
Berkshire's retention of AXP after dumping Visa and Mastercard highlights the closed-loop advantage and premium customer base that drives $150 average tickets and 2.3% charge-offs. Yet the article ignores how AXP's direct lending exposure and 3-4% merchant discount rates create cyclical credit risk and potential merchant pushback that pure networks avoid. High annual fees also leave less room for growth if affluent spending slows. Long-term ownership since the 1990s does not guarantee future outperformance if macro conditions tighten.
The premium moat has sustained superior spend and credit quality through multiple cycles, and Berkshire's decades-long hold suggests any cyclical risks are already priced in at current multiples.
"AXP's moat is real, but the article mistakes portfolio inertia for conviction, and ignores that Buffett's simultaneous exit from Visa/Mastercard raises questions about payment-network valuations broadly."
The article conflates Buffett's *historical* holding with a current endorsement. Yes, AXP's closed-loop model and high-spend customer base create real moat advantages—the 2.3% charge-off rate versus Capital One's 3.7% is material. But Berkshire's Q1 13F shows it *trimmed* positions across the board; the fact AXP 'remained steady' is passive retention, not active conviction. The article omits AXP's valuation: at ~18x forward P/E (vs. Visa/Mastercard at 35-40x), it's cheaper, but that discount may reflect slower growth or higher recession sensitivity than the piece suggests. The $150 average transaction size is a strength, but also concentration risk—recessions hit high-net-worth spending first.
Buffett's recent Visa/Mastercard exit while holding AXP could signal he views AXP as overvalued relative to its network-fee upside, or that the closed-loop model's credit risk (interest income exposure) now outweighs the moat benefit in a higher-rate environment.
"AXP's valuation is supported by its unique ability to harvest both net interest income and high-margin merchant fees, provided the premium consumer segment remains insulated from broader macroeconomic volatility."
American Express (AXP) is currently trading at roughly 18x forward earnings, a premium valuation justified by its 15-17% EPS growth guidance and superior credit quality. The 'closed-loop' model is a structural advantage, but the market often ignores the regulatory risk regarding interchange fee caps and the potential for a 'luxury' consumer pullback. While the article highlights the 2.3% net charge-off rate as a sign of strength, we must acknowledge that AXP is aggressively targeting Gen Z and Millennial cohorts to drive growth. If these younger, less-tenured segments face labor market softening, the credit quality advantage could erode faster than the historical data suggests.
If the U.S. enters a period of stagflation, AXP's reliance on discretionary travel and entertainment spending makes it significantly more vulnerable than the article's 'resilient' narrative implies.
"Amex’s moat and pricing power may not be enough to offset a meaningful revenue slowdown or valuation compression in a downturn."
While Berkshire’s stake and Amex’s closed-loop moat make a compelling case for durable profitability, the article glosses over cycle risk and valuation. Amex is heavily cyclical, tied to discretionary spending and travel. A sharper recession or slower travel rebound could compress loan growth, payment volumes, and merchant discounts, pressuring earnings. Valuation has long priced premium margins and brand moat; any multiple contraction would hurt total return even if ROE remains strong. Potential headwinds from fintech competition, international growth slower than expected, regulatory pressure on interchange fees, and higher funding costs add to the downside risk. In short, the long-duration bull story comes with meaningful hiccups.
Bullish counter: Amex’s closed-loop network and premium customer base create sticky pricing power and high ROIC, and Berkshire’s ownership signals conviction that the core economics remain durable even in downturns.
"AXP's lending model exposes it to funding-cost spikes that pure networks avoid, limiting upside even at 18x forward P/E."
Claude flags AXP's recession sensitivity versus networks but misses how its direct lending book creates asymmetric funding-cost pressure in a sticky 5%+ Fed funds world. Unlike V/MA's pure fee model, AXP must absorb deposit and wholesale borrowing spikes that compress net interest margins faster than charge-offs alone would suggest. This dynamic could cap any re-rating even if credit metrics hold.
"AXP's NIM squeeze in a sticky-rate environment is a bigger earnings headwind than any charge-off normalization, and the article ignores it entirely."
Grok's NIM compression thesis is sharp, but needs quantification. AXP's deposit funding costs rose ~60bps YoY in 2023; if Fed stays at 5.25-5.50%, how much further do NIMs compress before credit normalization offsets it? Also: AXP's wholesale funding is shorter-duration than peers', meaning repricing risk is front-loaded. But the article never addresses funding mix or duration ladder—critical omission for a lender masquerading as a network.
"AXP's deposit-heavy funding base mitigates wholesale rate risk, but shifts the core risk to credit quality in newer, less-tenured customer segments."
Claude, you hit the critical point on funding, but the 'lender masquerading as a network' narrative ignores AXP's massive shift toward high-yield savings deposits, which now fund over 60% of their lending book. This provides a structural hedge against wholesale rate spikes that pure lenders lack. The real risk isn't just NIM compression; it's the 'Millennial trap' Gemini mentioned—if AXP’s growth relies on younger cohorts, they are essentially underwriting consumer debt, not just processing payments.
"Funding duration and deposit beta risk could compress AXP's margins faster than expected, overshadowing its closed-loop moat."
Claude, your funding mix focus is valuable but incomplete. The real risk is duration-based funding and deposit beta in a downturn: AXP funds >60% of lending with high-yield deposits, which can reprice quickly as rates stay high or rise, squeezing NIM even if charge-offs stay low. Regulatory limits on interchange and consumer-credit cyclicality amplify downside if travel/consumption slows. The moat alone may not defend earnings.
The panel's net takeaway is that American Express (AXP) faces significant cyclical risks and potential headwinds, despite its closed-loop advantages and strong credit quality. The panelists agree that AXP's valuation may not fully reflect these risks.
AXP's closed-loop model and high-spend customer base create real moat advantages.
Recession sensitivity and potential compression of loan growth, payment volumes, and merchant discounts, pressuring earnings.