Following Warren Buffett's Investment Playbook: Two Tech Giants Poised for Growth

When investment legend Warren Buffett stepped back from his six-decade leadership at Berkshire Hathaway, his legacy and influence over the company’s portfolio decisions remained deeply embedded in its strategy. His philosophy of long-term holdings and fundamental value assessment continues to guide investment decisions. For investors looking to benefit from his proven track record, certain stock picks from the Berkshire portfolio offer compelling opportunities heading into 2026.

The investment landscape has shifted toward artificial intelligence as the defining force of this decade, and two holdings in particular demonstrate why Buffett’s team recognized their potential. Both Alphabet and Amazon have committed substantial resources to AI development while maintaining their core business strengths—a combination that could unlock significant gains for patient investors.

Alphabet: When AI Investments Start Paying Real Dividends

Alphabet faced skepticism in 2025 when competitors appeared to be gaining ground in AI capabilities. Market participants worried that Google’s search dominance might eventually erode under pressure from more innovative rivals. However, the company’s commitment tells a different story: it pledged between $91 billion and $93 billion in capital expenditures last year specifically targeting AI advancement and competitive positioning.

The results are starting to materialize. Gemini improvements have impressed industry observers, and the expanding role of Waymo in autonomous vehicles has caught investor attention. Most tellingly, Q3 data revealed that Alphabet generated nearly $74 billion in free cash flow over the previous twelve months—a figure that doesn’t account for those massive capex outlays. This demonstrates that the company can fund aggressive innovation while still maintaining strong profitability.

Buffett’s team clearly took notice of this inflection point. In the third quarter of 2025, they acquired over 17.8 million additional shares, representing a $4.3 billion investment that pushed Alphabet toward 2% of Berkshire’s total portfolio. The conviction behind this buying spree suggests they see substantial runway ahead.

On valuation metrics, Alphabet trades at a P/E ratio of 31, matching the broad S&P 500 average. Among the “Magnificent Seven” tech stocks, it ranks as the second-cheapest by earnings multiple—an attractive entry point for a company positioned to benefit from AI advancement for years to come. As the company continues deploying capital into next-generation technology, the stock appears well-positioned for upward momentum through 2026 and beyond.

Amazon: A Valuation Reset Amid Strategic Investment

Amazon presents a similar narrative: massive investment in AI infrastructure coupled with real operational improvements. Over the past year, the e-commerce and cloud giant invested $120 billion in capital expenditures to build AI capabilities across its ecosystem. This scale of spending might seem unsustainable until you examine the numbers more carefully.

Despite that enormous investment, Amazon still managed to generate $15 billion in free cash flow—proof that the business model can absorb AI spending without sacrificing financial health. These investments are already showing promise. AWS remains a profit engine, AI is being deployed to enhance the advertising business, and e-commerce operations are becoming increasingly efficient through machine learning optimization.

The stock experienced momentum challenges in recent weeks as traders rotated away from AI-focused holdings. Additionally, cloud market competition has intensified, with Microsoft Azure and Google Cloud both pursuing aggressive strategies. This competitive pressure has weighed on the stock’s price and created a valuation reset.

Yet this pressure may represent opportunity. Amazon’s P/E ratio now sits at just 32 times earnings—only marginally higher than Alphabet despite Amazon’s stronger growth potential. Buffett’s team accumulated most of its Amazon position back in 2019, and while they took profits on a small portion in later years, that selling activity ended in 2023. The halt in selling suggests management views the current setup as attractive or, at minimum, not warranting further reductions.

Given the scale of Amazon’s AI investments and the company’s track record of converting R&D spending into competitive advantages, patient investors have reason to believe the stock could resume its upward trajectory as these initiatives mature and generate tangible business benefits throughout 2026.

The Warren Buffett Signal: What It Means for Your Portfolio

The broader lesson from examining these stock picks lies in understanding what Buffett’s investments communicate about the future. Both companies are spending heavily on AI—not as a speculative bet, but as a fundamental restructuring of their competitive moats. Both generate sufficient cash flow to fund these initiatives while rewarding shareholders.

Neither stock represents a controversial or speculative choice. Both Alphabet and Amazon operate in sectors with sustainable demand, maintain pricing power, and are led by management teams focused on long-term value creation. Their current valuations, while not cheap by historical standards, remain reasonable relative to the S&P 500 and their own growth prospects.

For investors considering these opportunities, the key takeaway is that Buffett’s team doesn’t chase trends—they invest in companies addressing fundamental market shifts with sound business models and strong balance sheets. That disciplined approach has generated 973% in average returns through Stock Advisor’s history, compared with 195% for the S&P 500 index.

Whether you’re a dividend-focused investor or a growth seeker, monitoring the holdings that Buffett’s organization chooses can provide valuable insight into where long-term opportunity may reside. These two stock picks deserve serious consideration for any portfolio positioned to capture the technology sector’s ongoing evolution.