Warren Buffett, who stepped down as CEO of Berkshire Hathaway last month to become chairman emeritus, is maintaining a defensive posture amid a surge in artificial intelligence valuations. The conglomerate is holding a $365.5 billion cash reserve, a position that allows it to pursue acquisitions if the market experiences a downturn. This strategy contrasts sharply with the recent performance of AI infrastructure stocks, which have seen exponential gains driven by demand for data center equipment.
The S&P 500 has delivered an average annual return of 23% between 2022 and 2025, a period marked by optimism regarding generative AI. This rally has propelled specific AI-related stocks to record heights. Sandisk shares, for instance, rose over 1,000% in the last 12 months due to soaring product demand. Space Exploration Technologies, also known as SpaceX, has similarly attracted Wall Street attention following its recent initial public offering. However, SpaceX trades at a price-to-sales multiple of 68, a figure that stands in stark contrast to the S&P 500's average of 3.85.
Market analysts note that these valuations resemble the dot-com bubble of the late 1990s. The cyclically adjusted price-to-earnings multiple for the S&P 500 currently stands at 41.8, well above its historical average of 17.4. The only previous instance where this metric exceeded the current level was in late 1999, when it peaked at 44 shortly before the market crash.
In a May interview with CNBC, Buffett criticized the current market sentiment, stating, "It's tough to find values when everybody is preferring gambling." His approach favors stable, low-priced businesses with straightforward models over speculative sectors like generative AI. While Berkshire Hathaway has limited direct exposure to pure-play chipmakers, it holds positions in diversified consumer-focused tech giants such as Alphabet, Apple, and Amazon.
Buffett has also invested in the utility sector to indirectly benefit from AI infrastructure growth. Holdings include MidAmerican Energy and NV Energy, which operate power grids in the Midwest and Nevada. These utilities serve the significant energy demands of AI data centers located in those regions. Some observers attribute these selections to timing rather than foresight, as many investments were made prior to the release of ChatGPT. Nevertheless, the portfolio demonstrates a method for gaining exposure to growth opportunities while limiting downside risk.
Berkshire Hathaway's strategy under Buffett prioritized stable, profitable technology leaders over less diversified AI stocks that carry higher risk. The company's significant cash position remains a key asset for potential opportunistic buying during periods of market stress.