The Shifting AI Play: Why Buffett Is Moving Away from Falling Apple and Betting on Alphabet Instead

A Portfolio Pivot Worth Noting

Warren Buffett’s Berkshire Hathaway just made a striking move in its third-quarter holdings, signaling a major shift in how the legendary investor views the tech landscape. With approximately $267 billion deployed across 41 U.S. stocks, the conglomerate executed trades that tell a fascinating story about valuation, artificial intelligence opportunities, and the cost of missing early positions.

The narrative is simple but powerful: Berkshire continues reducing its Apple stake while simultaneously initiating a fresh position in Alphabet. For a stock picker who has historically kept technology at arm’s length, this reversal deserves serious attention from any investor monitoring the AI revolution.

The Falling Apple Problem: Valuation Meets Saturation

Apple remains Berkshire’s largest single holding at 21% of the portfolio, but appearances deceive. Over the past two years, Buffett has slashed the position by roughly three-quarters, offloading 41.7 million shares during Q3 alone. The arithmetic is telling: what once dominated the portfolio is now being methodically trimmed.

The company’s fundamentals appear sound on the surface. Q3 revenue hit $102 billion, up 8%, with iPhone, Mac, and services all performing respectfully. Non-GAAP earnings per share climbed 13% to $1.85. Apple’s ecosystem remains formidable—2.35 billion installed devices create an unmatched distribution network for upcoming AI-driven services.

The problem isn’t the business; it’s the price tag. At 36 times forward earnings with Wall Street expecting just 10% annual growth over the next three years, Apple trades at a premium that stretches credibility. The price-to-earnings-to-growth ratio hits 3.6—well above the 2.0 threshold that typically signals overvaluation. Even with upcoming paid AI features generating incremental revenue, the mathematics simply don’t support the current valuation for value-oriented investors.

The Alphabet Awakening: Late Arrival, Strong Position

Contrast that with Berkshire’s unexpected move into Alphabet: 17.8 million shares acquired during Q3, establishing a 2% portfolio position. For context, Alphabet stock has appreciated 12,180% since its 2004 IPO—a staggering return that makes today’s entry seem impossibly late.

Yet here lies the lesson Buffett is demonstrating: timing the perfect entry point matters less than recognizing when a company still has runway ahead.

Alphabet’s Q3 results justify the enthusiasm. Revenue jumped 16% to $102 billion (matching Apple’s top line but with healthier growth momentum). GAAP earnings surged 35% to $2.87 per share. CFO Anat Ashkenazi specifically highlighted robust demand for AI infrastructure, particularly Gemini model adoption and custom chip utilization.

The monetization pathways span multiple directions. Google’s AI capabilities in search are already driving higher conversion rates and query volumes. Google Cloud competes credibly with industry leaders in large language models and development tools. The company’s custom Tensor Processing Units (TPUs) have been adopted by Apple and Anthropic, with Meta Platforms potentially deploying them at scale by 2027.

Perhaps most intriguingly, Waymo—Alphabet’s autonomous vehicle subsidiary—operates commercial robotaxi services across six cities (Phoenix, Los Angeles, San Francisco, Austin, Atlanta, Miami) with expansion into Texas and Florida underway. Early-stage revenue generation is already happening; future opportunities could dwarf current expectations.

The Valuation Calculus: Comparing Opportunity to Price

Wall Street projects 16% annual earnings growth for Alphabet over the coming three years, yielding a 30-times forward valuation. That produces a PEG ratio of 1.9—substantially more attractive than Apple’s 3.6.

In plain terms: investors are paying a significant premium for Apple’s maturity and market dominance, while Alphabet offers multiple pathways for growth across AI advertising, cloud infrastructure, and potentially transformative autonomous services—all at a more reasonable valuation.

The Takeaway for Long-Term Investors

Buffett’s portfolio repositioning exemplifies a disciplined approach to capital allocation: recognizing when a dominant company becomes expensive, and pivoting toward opportunities still early in their monetization cycle. That Alphabet’s stock has appreciated over 12,000% and still passes his investing lens speaks volumes about the potential embedded in AI infrastructure and digital advertising convergence.

For investors contemplating their own technology exposure, the question isn’t whether falling Apple prices alone justify selling. The real signal is whether Alphabet’s growth runway and reasonable valuation offer better risk-adjusted returns for the decade ahead.