Buffett Rotates from Apple to Alphabet, Underscoring Apple’s Rich Valuation

What happened

Berkshire Hathaway sold Apple shares in Q3 and added to Alphabet, with the article framing the move as a shift toward a cheaper, faster-growing mega-cap compounder. That narrative fits uneasily with Apple’s current valuation profile from the DeepValue work, which shows a superb business—roughly $416 billion in FY2025 revenue, $112 billion in net income and nearly $100 billion in annual free cash flow—trading at about 35.5x earnings and more than 150% of DCF-based intrinsic value. While the article emphasizes Alphabet’s relative appeal, it implicitly highlights that Apple’s multiple already bakes in sustained high growth and regulatory resilience that are far from guaranteed given ongoing App Store scrutiny and concentrated Taiwan/China supply-chain risk. Buffett’s sale could partly reflect portfolio-size and risk-management considerations, but it is hard to ignore that a long-term, valuation-driven investor is reducing exposure right where our work also flags a thin margin of safety. With no new operating data out since the 10-K, this is primarily a sentiment and positioning development that strengthens the case for taking profits rather than evidence of a fundamental crack in Apple’s franchise.

Implication

For existing Apple shareholders, the combination of stretched valuation and a visible seller in Berkshire argues for at least reassessing position size, especially where Apple has grown into an outsized portfolio weight. The business remains exceptional, but at more than 150% of DCF-based value, forward returns rely on optimistic assumptions about services growth, regulatory outcomes, and an undisturbed Taiwan/China supply chain. If other large holders follow Berkshire in de-risking and rotating to cheaper peers like Alphabet, Apple’s multiple could compress even if fundamentals stay solid, leading to years of underperformance versus other mega-cap growth names. Investors should resist the simplistic takeaway to “sell because Buffett sold” and instead use this as a prompt to update their own valuation work, scenario-test regulatory and geopolitical hits, and compare Apple’s risk-adjusted return to alternatives. New buyers, in particular, should be wary of initiating large positions at this price and instead look for a more attractive entry point or better-priced compounders in the same quality tier.

Thesis delta

The news that Berkshire is selling Apple and buying Alphabet does not introduce new fundamental information but modestly reinforces our valuation-driven caution: it is additional evidence that sophisticated, long-term capital views Apple as expensive relative to peers. We therefore maintain the DeepValue stance of POSSIBLE SELL/trim on Apple, but with slightly higher conviction that the current risk/reward is skewed to the downside unless the stock corrects or fundamentals accelerate meaningfully. Our intrinsic value framework and key risk factors (regulation, supply chain, services durability) remain unchanged; this is a sentiment and positioning data point that supports, rather than reshapes, the existing thesis.