Warren Buffett's message to investors: Be careful

Warren Buffett Comments on Market Conditions and AI Spending in CNBC Interview

Warren Buffett said during a CNBC interview on Wednesday that it has become difficult to identify undervalued investments amid widespread market speculation. The 95-year-old Berkshire Hathaway chairman, who stepped down as chief executive at the start of the year, described challenges in locating opportunities because market participants have increasingly favored short-term trading over long-term ownership.

"It's tough to find values when everybody is preferring gambling," Buffett said. He added that "humans love to gamble so much, there's more money in actually cultivating gamblers than there is in cultivating investors."

Berkshire Hathaway held approximately $380 billion in cash at the end of March. Finance professor David Kass of the University of Maryland, who writes about Berkshire, stated that Buffett has expressed caution regarding increased use of derivatives and shorter investment holding periods. Kass noted that this approach has meant Berkshire did not participate in some equity price increases in recent years.

AI infrastructure spending

Buffett addressed capital expenditures by large technology companies developing artificial intelligence systems. He referred to spending by companies including Meta, Microsoft, and Alphabet on chips, data centers, and related facilities.

"That's real money," Buffett said. "That's the game they're playing now. They weren't playing that game with computer software."

Kass said the scale of these expenditures has reduced cash flows previously used for share repurchases at some companies and may require additional external financing. He added that the investments carry uncertainty about future returns.

Alphabet investment

Berkshire began purchasing Alphabet shares in 2025. By March 31, the position reached nearly 58 million shares, valued at $20.5 billion at that time. In June, Berkshire acquired an additional $10 billion of Alphabet shares through a private placement. At Thursday's closing price, the total holding was valued at approximately $31 billion, making it the third-largest equity position after Apple and American Express.

Buffett said of Alphabet: "I think they're more likely to be a winner based on the record than probably 90% or 95% of what gets merchandised through Wall Street."

Brett Gardner, author of a book on Buffett's early investments, said the purchase appears inconsistent with Buffett's remarks on AI-related costs. Gardner noted that evaluating the investment requires assessing expected returns on the infrastructure spending, an area where Buffett did not provide a detailed view during the interview. Gardner suggested one possible interpretation is that Alphabet could reduce spending if returns prove insufficient and resume generating substantial free cash flow.

Market context

Adam Schwartz, chief investor at Black Bear Value Partners, said Buffett's remarks focused on the risks of prices being driven primarily by speculation rather than on avoiding specific technologies. Schwartz stated that Buffett has long maintained that underlying business fundamentals ultimately determine value even during periods when they appear less relevant to market prices.

The interview occurred as several large technology firms continue substantial capital investments in artificial intelligence infrastructure. Berkshire's cash position and selective equity purchases, including the Alphabet transactions, reflect its current allocation approach.

Buffett's comments were made in a single interview and represent his assessment at the time. Berkshire's investment decisions are executed by its current management team led by chief executive Greg Abel.