Warren Buffett’s Berkshire Hathaway portfolio has generated extraordinary returns over decades, helping transform the investment conglomerate into the world’s 11th-largest company with a market capitalization exceeding $1 trillion. While many Berkshire holdings trade at premium valuations, two of the portfolio’s technology positions have underperformed significantly in 2025, creating potential entry points for patient investors.
Apple Inc. (AAPL)
Market Cap: $3.8 trillion
2025 Performance: -10%
Apple remains Berkshire Hathaway’s largest holding at over 20% of the portfolio, despite Buffett reducing his position recently. The tech giant’s stock has fallen 10% this year while broader markets have rallied, with investors expressing disappointment over the company’s artificial intelligence offerings.
The Investment Case
Apple’s fundamental business strengths remain intact. The company maintains a large, differentiated consumer products business with an exceptionally sticky ecosystem. Loyal customers purchase multiple devices that seamlessly connect, creating high switching costs and recurring revenue streams.
While often categorized as a technology company, Apple functions equally as a consumer products business with pricing power and brand loyalty that Buffett traditionally favors. The tech component provides AI exposure, though Apple Intelligence has underwhelmed investors so far with services that haven’t stood out from competitors.
Recent product launches demonstrate why Apple retains customer devotion. The iPhone Air debuted as the thinnest smartphone on the market, appealing to style-conscious users who treat devices as statement pieces. The upcoming iPhone 17 promises enhanced quality and capabilities, while new AirPods will use Apple Intelligence for real-time language translation.
Why the Opportunity Exists
The market’s negative reaction to recent product announcements created the current discount. Investors wanted more aggressive AI innovation, and Apple’s measured approach disappointed growth-focused traders. This sentiment-driven selloff may have created an attractive entry point for long-term investors who recognize Apple’s durable competitive advantages.
The stock’s 10% decline stands in stark contrast to its business fundamentals, which show a company still dominating premium consumer electronics with loyal customers unlikely to switch platforms. For investors willing to be patient while Apple develops its AI strategy, current prices offer compelling value.
Amazon.com Inc. (AMZN)
Market Cap: $2.3 trillion
2025 Performance: +2%
Amazon represents just 0.7% of Berkshire’s public stock holdings, making it a relatively small position. Yet the e-commerce and cloud computing giant has dramatically underperformed broader markets, gaining only 2% in 2025 while the S&P 500 has risen roughly 15% and the Nasdaq has surged approximately 18%.
The Underperformance Story
Amazon’s five-year stock performance reveals the extent of its market lagging. Shares have risen just 43% over the past five years while the S&P 500 and Nasdaq Composite have both more than doubled. This sustained underperformance stems from identifiable headwinds rather than business deterioration.
The company’s e-commerce operations, which still generate the majority of revenue, faced substantial challenges from pandemic-related supply chain disruptions and subsequent inflationary pressures. More recently, tariff policies have created additional cost pressures for the retail business.
The Forward Opportunity
Despite near-term challenges, Amazon remains one of the world’s strongest businesses with multiple growth drivers that may be underappreciated. Trading at roughly 33.5 times expected 2025 earnings, the valuation reflects growth expectations but appears reasonable given the company’s positioning.
The artificial intelligence opportunity for Amazon Web Services appears both acknowledged and underappreciated. While investors recognize AWS will benefit from AI infrastructure spending, the magnitude and duration of this tailwind may be underestimated. Cloud infrastructure demand for AI workloads could drive years of accelerated AWS growth.
Perhaps more importantly, the market seems largely overlooking how AI and robotics will transform Amazon’s e-commerce margin profile. Automation in warehouses and logistics, AI-powered inventory management, and robotic delivery systems should dramatically improve operating leverage in the retail business over time.
Risk Considerations
Amazon’s growth-dependent valuation means the stock remains vulnerable to multiple compression if growth disappoints. Tariff headwinds could persist longer than anticipated, pressuring retail margins. Competition in both e-commerce and cloud computing continues intensifying, requiring sustained innovation and capital investment.
Portfolio Perspective
Both stocks share similar characteristics: market leadership positions, temporary underperformance creating discounts, and long-term growth drivers that may be underappreciated. The contrarian opportunity exists precisely because these stocks have disappointed in 2025 while broader markets rallied.
For investors comfortable with Berkshire Hathaway’s investment philosophy of buying quality businesses at reasonable prices, these two holdings offer exposure to dominant franchises trading below their recent peaks. The key question is whether current headwinds represent temporary challenges or structural deterioration.
The evidence suggests temporary factors. Apple’s ecosystem remains as strong as ever, even if AI development is proceeding more slowly than investors wanted. Amazon’s fundamental businesses in e-commerce and cloud computing continue growing, even if stock performance hasn’t reflected that growth.
Investors seeking to follow Buffett’s approach might view these underperforming holdings as opportunities rather than warnings. When quality businesses trade at discounts due to sentiment rather than fundamentals, patient capital often gets rewarded.
