How to Approach Stocks Like Warren Buffett — Especially AI Stocks

Warren Buffett is famous for saying that “the stock market is a device for transferring money from the impatient to the patient.”

In an era dominated by AI, exponential technology growth, and trillion-dollar companies, his principles matter more than ever.

Buffett doesn’t chase trends.

He doesn’t buy hype.

He buys value, moats, and long-term dominance.

But here’s the twist:

In 2025, Buffett is leaning into AI — and that tells us everything about where smart investors should look next.

Before we get started to the investment style of Warren Buffett and how he shifted his attention to AI stocks, it's worthwhile to add a few highlights for more context:

• Warren Buffett was born in 1930 in Omaha and he still lives there.

• He became interested in stocks when his father took him to Wall Street when he was a child.

• His favorite book is The Intelligent Investor by Benjamin Graham and he says that the book gave him the investment framework.

• He became a millionaire when he was 32.

• He is the biggest shareholder of Coca Cola, and Apple.

• He became a billionaire when he was 56.

• He always strongly believes the compound principle and keeping the high value stock for many years.

Let’s break down how Buffett evaluates companies, how he’s repositioning into AI, and how you can apply his strategy to build a powerful, future-proof AI stock portfolio.

1. The Warren Buffett Way: Why His Philosophy Still Wins in 2025

Buffett’s approach has five pillars:

1. Buy companies, not tickers.

He invests only when he believes the company will be stronger 10–15 years from now.

2. Find real value.

Not cheap stocks — but high-quality companies priced below their real worth.

3. Look for durable competitive advantages (moats).

Brand power. Technology power. Network effects. Patents. Scale.

4. Favor management excellence.

He invests in leaders who think long-term, protect margins, and innovate consistently.

5. Ignore short-term market noise.

Buffett buys long-term compounding machines, not short-term speculation.

This philosophy doesn’t change — even when the world shifts toward artificial intelligence.

If anything, AI magnifies Buffett’s strategy:

Because AI companies with strong moats will dominate global markets for decades.

2. Warren Buffett’s Spectacular Steps: Selling BYD & Apple, Buying Alphabet

2025 has been one of Berkshire Hathaway's most strategic repositioning years.

Buffett reduces Apple — but still keeps it huge.

Berkshire sold 41.8 million Apple shares — about 14.9% of its position — worth roughly $9.45 billion.

Apple remains one of Berkshire’s biggest holdings, but Buffett is securing profits and reallocating.

Buffett trims BYD further.

His long-term winning investment in China’s EV giant continues to be reduced, as Buffett shifts away from certain Asian equities.

Then comes the big move… Buffett buys Alphabet.

Berkshire purchased $4.3 billion in Alphabet stock, around 17.8 million shares, making it a top-10 holding.

This is spectacular for one reason:

Buffett is betting on AI — but in a Buffett way.

He’s not buying speculative AI startups.

He’s buying a business with:

• a dominant ecosystem

• massive cash flows

• an unbeatable AI moat

• high-impact global products

• multi-decade growth potential

This move signals something powerful:

AI is no longer a trend. It is the new foundation of the modern economy.

And Buffett wants a piece of it.

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3. Why AI Stocks Are Outperforming the S&P 500

The S&P 500 is set to grow ~29.2% in 2025, rising from ~6840 (Nov 2024) to ~8836 (Dec 2025).

Strong.

But nowhere near AI.

AI Stock Performance in 2025

NVIDIA: +42% YTD, with forecasts up to +75% or even +100%

Alphabet: +20–24%

Teradyne: +55.5%

Oracle: +69.6% over the past year

AI stocks consistently outperform the market because:

• AI demand is accelerating globally

• Companies are reshaping entire industries

AI is not cyclical — it’s transformational

Governments and corporations are scaling AI infrastructure

AI winners gain exponential advantages, not linear ones

The gap between the S&P 500 and top AI stocks is widening — and Buffett's pivot proves AI is becoming a safe long-term value play.

4. How to Apply Warren Buffett’s Stock-Picking Strategy (Even for AI)

Buffett would approach AI stocks the same way he approaches everything:

1. Understand the business.

Does the company solve a global, long-term problem?

2. Assess the moat.

AI companies with strong data, hardware dominance, cloud ecosystems, or enterprise lock-in score highest.

3. Evaluate management discipline.

Buffett loves companies with efficient capital allocation and strong margins.

4. Only invest when the price is right.

Even great companies can be overpriced.

This is where valuation indicators like P/S ratio help.

5. The Key Indicators: P/S Ratio, Earnings, and Moat Analysis

For fast-growing AI companies, three indicators help assess value.

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1. Price-to-Sales (P/S) Ratio

P/S = Market Cap ÷ Revenue

Useful when earnings fluctuate due to heavy R&D investments (common in AI).

Top AI Stocks

NVIDIA: P/S 24–28

Alphabet: P/S 6.5–7

Broadcom: P/S 7–8

Oracle: P/S 5–6

High P/S suggests strong investor confidence; low P/S can indicate undervaluation.

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2. Earnings per Share (EPS) Growth

Shows profitability momentum.

Broadcom EPS projection: 446%

Oracle EPS: ~61%

NVIDIA EPS: ~54%

These are monstrous.

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3. Moat & Market Dominance

Ask:

“Can competitors realistically catch up?”

For AI hardware, cloud ecosystems, or enterprise software — moats matter more than ever.

6. Which AI Stocks to Consider in 2025

Below are the five stocks to highlight, using Buffett-style long-term analysis.

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Alphabet (GOOGL)

What They Do

AI search, large language models, autonomous driving (Waymo), cloud infrastructure, and global-scale advertising.

Growth in 2025

56% stock growth

Strong AI and cloud revenue acceleration

P/S Ratio

6.5–7 — balanced valuation for a giant.

Market Position

Dominant ecosystem + huge AI investments + diversified cash engine.

Why It Fits Buffett’s Style

Durable moat, global scale, and long-term compounding potential.

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NVIDIA (NVDA)

What They Do

AI GPUs, data center chips, networking, AI systems, omniverse computing.

Growth in 2025

+42% YTD

Forecast: +44% to +75%, possibly +100% in bullish scenarios

P/S Ratio

24–28 — priced high due to massive demand and dominance.

Market Position

Controls over 80% of the AI GPU market.

Why Buffett Might Like It

Unmatched monopoly-level moat — cash machine for the next decade.

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Broadcom (AVGO)

What They Do

Custom AI chips, AI networking hardware, VMware enterprise software.

Growth in 2025

Price upside: ~14.9%

EPS growth projection: 446% (insane)

P/S Ratio: 7–8

Market Position

Key AI chip supplier to OpenAI, Anthropic, and hyperscalers.

Buffett Fit

Deep moat + diversified hardware/software + predictable growth.

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Teradyne (TER)

What They Do

AI-driven robotics, manufacturing automation, industrial testing, 5G equipment.

Growth in 2025

+55.5% YTD

Market Position

Critical player in Industry 4.0 and robotics automation.

Buffett Fit

Strong cash flows, essential industrial role, huge long-term demand.

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Oracle (ORCL)

What They Do

AI cloud infrastructure, AI databases, autonomous data platforms, enterprise automation.

Growth in 2025

Stock up ~69.6% over the past year

EPS growth projection: 60.7%

P/S Ratio: 5–6

Market Position

Massive enterprise demand + strong multi-cloud AI partnerships.

Buffett Fit

Enterprise lock-in and predictable AI cloud growth.

7. How to Build Your Modern Buffett-Style AI Stock Portfolio

Here is a practical way to combine Buffett wisdom with AI growth:

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1. Choose companies with durable moats

AI winners must have strong advantages:

• network effects

• unmatched hardware

• unmatched cloud scale

• enterprise lock-in

• deep R&D pipelines

(NVIDIA, Alphabet, Broadcom, Oracle)

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2. Balance across the AI value chain

AI is not one industry — it is an ecosystem:

• Compute (NVIDIA, Broadcom)

• Cloud + Data (Oracle, Alphabet)

• Automation + Robotics (Teradyne)

• AI Applications (Alphabet)

Buffett would diversify across leaders — not chase one high-flyer.

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3. Avoid overpaying

Buffett would love:

• Oracle’s P/S of 5–6

• Alphabet’s P/S of 6–7

• Teradyne’s low P/S

He would be cautious — but not dismissive — of NVIDIA’s high valuation.

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4. Use dollar-cost averaging (DCA)

AI stocks swing wildly.

Buffett avoids timing the market.

He buys consistently and holds.

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5. Hold long term (5–10 years minimum)

AI revolutions compound:

chips → cloud → automation → enterprise → global infrastructure.

The biggest gains come from years, not months.

8. Final Thoughts: The Future Belongs to Patient Investors Who Understand Innovation

Warren Buffett built his fortune by understanding value, buying dominance, and holding for decades.

In 2025, AI companies represent the same type of long-term compounding power that Coca-Cola, American Express, and Apple once represented.

Buffett’s partial shift from Apple to Alphabet shows a clear message:

• AI is entering its compounding era.

• The future belongs to companies building global-scale AI infrastructure.

• Smart investors should look at AI not as speculation — but as durable value.

Approach AI stocks the way Buffett approaches all investments:

With discipline, patience, valuation awareness, and a focus on the world’s most impactful companies.

Those who invest like Buffett — but with an understanding of today’s technological landscape — are positioned to win the next decade.

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