Why Buffett's Berkshire Still Backs AI Giants Despite Massive Portfolio Shift

The Strategic Play Behind Buffett’s Magnificent Seven Exposure

Warren Buffett has never been one to shy away from emerging sectors, and his recent portfolio moves prove it. Despite concerns about valuation bubbles and market concentration, Berkshire Hathaway maintains meaningful stakes in three major tech players from the so-called “Magnificent Seven,” with these holdings representing roughly 24% of the company’s massive $305 billion equities portfolio.

What’s fascinating isn’t just that Buffett is betting on AI—it’s how he’s doing it. Rather than chasing pure-play artificial intelligence companies, Berkshire has positioned itself in tech giants with diversified, fortress-like business models. This tells us something important about the investing legend’s philosophy: he’s willing to evolve, but never recklessly.

Amazon: The Quiet $2.1B+ Play in Cloud Leadership

Let’s start with the smallest but increasingly important piece: Amazon, which comprises just 0.7% of Berkshire’s holdings. Don’t let the percentage fool you—this reflects deliberate restraint, not disinterest.

Amazon operates two powerhouse businesses that most people vastly undervalue separately. On the surface, there’s the e-commerce empire: overnight shipping, Prime subscriptions, and recurring revenue that keeps customers locked in. But the real AI story is AWS. In Q2 2025, Amazon Web Services commanded 30% of the global cloud market—an absolute fortress position.

What many investors miss: AWS had a massive runway before AI infrastructure became the hottest trend. The cloud migration story was already compelling. Now add AI compute demand on top of that tailwind, and you’ve got a business with years of runway ahead. At roughly 32x forward earnings, Amazon isn’t cheap, but Buffett clearly sees the long-term value.

Alphabet: The Comeback Play at Reasonable Multiples

Berkshire just initiated a fresh position in Alphabet during Q3, allocating roughly 1.8% of the portfolio. This move deserves closer attention because it signals Buffett’s confidence in a company that had a genuinely brutal 2024.

The DOJ legal battle tested Alphabet’s resilience—and it passed. A federal court sided with the government’s monopoly allegations but imposed surprisingly mild penalties, essentially allowing Google to operate with minimal disruption. More importantly, Alphabet has neutralized the ChatGPT threat to search dominance through innovations like Google Overviews and Gemini (its latest AI model).

The valuation picture here is intriguing: Alphabet trades at roughly 30x forward earnings, which is reasonable given its growth profile. But here’s what makes this especially appealing—Google isn’t a one-trick pony. YouTube, Google Cloud, Waymo, and advertising still generate enormous value streams. On a sum-of-the-parts basis, many analysts believe the stock trades at a significant discount to intrinsic value.

Apple: The Largest Stake Under Pressure

Apple remains Berkshire’s largest position at 21.3%, but here’s the plot twist: Buffett has been systematically exiting this stake. Since early 2023, Berkshire has sold roughly 74% of its Apple holdings.

This massive reduction reveals something crucial about Buffett’s current thinking. Apple possesses everything he typically hunts for: an unbreakable moat, a legendary brand, tremendous profitability, and a history of aggressive buybacks. Historically, this was vintage Buffett material. But the company’s size and market concentration risk have become liabilities in his portfolio construction.

There’s an interesting paradox: Apple has actually outperformed during AI-related selloffs precisely because it hasn’t plowed capital into AI infrastructure as aggressively as rivals like Nvidia or Microsoft. Investors worried about AI capex bubbles have felt comfortable holding Apple.

Yet Buffett’s actions speak louder than words. The 74% reduction suggests he views market concentration risk as more pressing than Apple’s individual merits. The question hanging over this position: Will Berkshire eventually exit entirely?

What This Portfolio Puzzle Tells Us About Buffett’s AI Thesis

The headline here isn’t that Buffett loves AI stocks—it’s that he’s refusing to overpay for AI purity. All three holdings trade at elevated multiples, but each operates non-AI businesses that provide genuine value cushions. Apple’s installed user base and ecosystem. Alphabet’s advertising juggernaut and YouTube dominance. Amazon’s AWS profitability and retail network.

This is disciplined opportunism. Buffett won’t buy companies trading at absurd valuations, but he’ll absolutely allocate capital to mega-cap tech firms with legitimate AI exposure and proven, profitable business lines that exist independent of the hype cycle.

The portfolio reduction in Apple combined with fresh Alphabet exposure suggests Buffett is actively rotating within his Magnificent Seven bets, favoring companies with better valuation discipline and lower concentration risk.