Buffett's Q3 Portfolio Move: Why He Picked the Most Undervalued Stock From Tech's Elite Seven

The latest quarterly filings reveal that Warren Buffett made a strategic play in the technology sector during the third quarter, acquiring a significant stake in a company that embodies his investment philosophy. This rare move into big tech demonstrates that even the world’s most cautious investor can identify compelling opportunities when valuations align with fundamentals.

The Investment Decision That Matters

Through Berkshire Hathaway, Buffett’s investment vehicle that has outpaced market returns for nearly six decades, the legendary investor acquired 17,846,142 shares of Alphabet, the parent company of Google Search. This 1.6% addition to his $267 billion portfolio signals confidence in one of the market’s most consequential players. Notably, this was his only new position established during the quarter—a deliberate, measured approach that reflects his disciplined investment style.

What makes this particularly noteworthy is Buffett’s historical skepticism toward technology companies. His two existing tech holdings—Amazon and Apple, with Apple being his largest position—were acquired only after he identified exceptional value and long-term competitive advantages. The Apple investment, initiated in early 2016, has appreciated approximately 900%, proving that timely entry into quality tech companies can generate transformational returns even well into their growth trajectories.

Why Alphabet Met His Criteria

During the third quarter, Alphabet traded at 23 times forward earnings estimates, making it the cheapest among the “Magnificent Seven”—the group of premier technology companies that has propelled the S&P 500 to new highs. This valuation gap presented the exact opportunity Buffett seeks: a quality company trading below its intrinsic worth.

The company’s competitive moat in search advertising remains formidable, generating consistent cash flows that support capital allocation and innovation. Additionally, Alphabet’s expanding cloud infrastructure and artificial intelligence capabilities position it to capture share in the multi-billion-dollar AI sector—a growth vector that could sustain earnings expansion for years ahead.

Valuation Still Favors Entry Today

Since Buffett’s purchase, Alphabet has modestly appreciated, now trading at 26 times forward earnings. Despite this modest increase, it remains the second-cheapest valuation among the Magnificent Seven peers, trailing only Meta Platforms. This persistent discount relative to competitors suggests the market may still be underappreciating Alphabet’s earnings power and AI opportunity.

The Broader Investment Thesis

For investors considering whether to follow Buffett’s footsteps into Alphabet, the fundamentals support both conservative and growth-oriented portfolios. The company has consistently grown earnings over extended periods, maintains pricing power in its core search business, and possesses the financial strength to invest aggressively in artificial intelligence infrastructure.

The combination of reasonable valuation, proven operational execution, and exposure to secular AI trends creates a compelling risk-reward proposition. When one of history’s greatest investors makes a selective technology purchase, it warrants serious consideration from those seeking quality companies at fair prices.