💥 Buffett Sold Apple and Bank of America — Here’s What He Bought Instead

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Hi Fellow Investors,

Warren Buffett officially stepped aside as CEO of Berkshire Hathaway at the start of the year.

Before leaving, he made one final portfolio move that is already paying off in a big way.

That decision offers a revealing look at how valuation discipline and AI-driven growth intersect in today’s market.

Key Points:

• Buffett continued trimming Apple and Bank of America as valuations stretched to historic levels.

• Berkshire deployed roughly $4 billion into Alphabet, a stock already up 78% in six months.

• Advertising cash flows and accelerating cloud growth made the valuation opportunity too compelling to ignore.

Buffett’s Valuation Discipline Never Wavered

Warren Buffett spent his final quarters as CEO of Berkshire Hathaway (NYSE: BRK.B) reducing exposure to stocks that had run far ahead of fundamentals.

Apple (NASDAQ: AAPL) and Bank of America (NYSE: BAC) both reached valuation levels that reflected extreme optimism.

Apple’s forward earnings multiple climbed well above peers despite slowing relative growth.

Bank of America traded near its richest tangible book valuation in decades as interest rate tailwinds faded.

For Buffett, elevated prices narrowed the margin of safety.

Cash Piled Up as Opportunities Became Scarce

Berkshire sold more stock than it bought for twelve consecutive quarters.

That discipline pushed cash and equivalents above $350 billion, an extraordinary sum even for Berkshire.

Buffett openly signaled frustration with stretched market valuations across sectors.

Short-term Treasury bills became the default holding while patience prevailed.

That patience set the stage for a rare and deliberate new purchase.

The One Stock Buffett Finally Pulled the Trigger On

Before retiring, Buffett initiated a meaningful position in Alphabet (NASDAQ: GOOGL), a company he previously called a missed opportunity.

His conviction stemmed from firsthand knowledge of Google Search’s pricing power through GEICO’s advertising spend.

Digital advertising remains an extraordinary cash engine with minimal marginal costs.

Despite AI disruption fears, search revenue continued accelerating through 2025.

The business proved far more resilient than skeptics expected.

AI and Cloud Growth Changed the Equation

Alphabet’s free cash flow surged past $70 billion over the last twelve months.

Heavy investment in AI infrastructure is fueling rapid expansion in Google Cloud.

Cloud revenue grew more than 30% while operating margins expanded meaningfully.

Backlog growth shows demand is outpacing supply as enterprises race to secure compute.

At the time of Berkshire’s purchase, valuation sat near a forward multiple of 20, an unusual discount for this quality.

Strengths

• Massive free cash flow generation provides flexibility to fund AI, buybacks, and strategic investments.

• Dominant digital advertising platform continues compounding despite emerging AI competitors.

• Google Cloud is transitioning from growth engine to profit engine at accelerating speed.

Weaknesses

• Regulatory scrutiny remains a persistent overhang across advertising and search businesses.

• Heavy AI capital expenditures pressure near-term margins.

• Competitive threats from generative AI platforms demand constant innovation.

Potential

• AI integration across Search, Cloud, and productivity tools could unlock new monetization layers.

• Operating leverage in cloud services may drive outsized earnings growth.

• Long-term valuation expansion remains possible as AI revenue visibility improves.

Conclusion

Buffett’s final major purchase highlights the enduring power of valuation-driven investing.

Alphabet combines elite cash generation with AI-fueled growth at a price that still makes sense.

For long-term investors, this may represent a rare alignment of quality, growth, and discipline.

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