Quick Read
Warren Buffett stepped down as CEO of Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B) at the end of 2025, ending a legendary career of more than 60 years that turned a failing textile company into a conglomerate worth over $1 trillion and earned him the nickname the “Oracle of Omaha.” Yet, in recent years, as the S&P 500 surged to new highs driven by tech gains, Berkshire underperformed the index. Over the last 12 months, it was beaten by the index by a near two-to-one margin as AI enthusiasm accelerated.
Buffett became a net seller of stocks over the past three years, reducing holdings and building a massive cash position that reached a record $381.6 billion by the end of the third quarter of 2025, largely in short-term Treasury bills. Observers interpreted this as caution on elevated valuations, positioning the company to deploy capital during a correction. Even as stocks are bouncing higher today after a week of brutal declines, it’s right to ask whether this is the crash Buffett anticipated?
AI Advancements Trigger Rapid Sector Repricing
The AI landscape shifted abruptly in late January when Anthropic released plugins for its Claude Cowork platform to enable specialized, multi-step workflows for paid users.
hat enable Claude to automate tasks like document review, compliance, and risk analysis, raising concerns that specialized software companies’ core value propositions could erode. This sparked talk of a “SaaS-pocalypse,” with fears extending to professional services like law, where billable hours for routine work might decline due to AI handling.
Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL) contributed to the pressure by launching Project Genie around the same time. This experimental tool, powered by Genie 3, allows users to generate interactive virtual worlds from text or images, simulating environments in real time. It prompted worries about disruption in game development and related sectors.
These developments fueled doubts about AI’s long-term sustainability and profitability, as high spending on infrastructure raised questions on returns. Leading tech names tumbled amid the reevaluation.
Nasdaq Plunge and Amazon’s Earnings Hit
The Nasdaq 100 experienced a sharp drop in early February, losing value over several days in what became its worst three-day slide since last April, with the broader Nasdaq Composite shedding over $1.5 trillion in market capitalization across four days. Tech and software stocks led the rout, driven by AI disruption fears and rotation to other sectors.
Amazon (NASDAQ:AMZN) increased the pressure on the market after releasing its fourth-quarter earnings report, which delivered mixed results including a slight miss on earnings per share. The company reported $1.95 in profit per share, falling short of Wall Street’s consensus estimate of $1.97. Though the two-cent shortfall was minor and Amazon exceeded revenue expectations, the news still unsettled investors, causing the stock to drop sharply by 8% in morning trading.
Even more concerning was Amazon’s guidance for about $200 billion in 2026 capital expenditures, far above the $146 billion analysts were forecasting, largely for AI, chips, robotics, and other infrastructure.
Despite the market’s rebound today, with gains in all major indexes, volatility remains and we may still see a reversal by the market’s close this afternoon as investors might not want to hold positions over the weekend. Further declines could materialize next week as sentiment adjusts.
This episode reflects the revaluation Buffett knew was coming, even if he didn’t know exactly when it would happen. Now, successor Greg Abel inherits a $380 billion war chest to acquire quality businesses or stocks at more attractive prices during fear-driven sell-offs.
Key Takeaways
Buffett has emphasized being prepared for a market crash. He has warned that if an investor isn’t ready for his stocks to lose half their value at some point, he shouldn’t invest in stocks.
Market crashes are a normal part of investing and often the best times to build wealth by buying undervalued assets. As Buffett also once famously noted, “Be fearful when others are greedy, and greedy when others are fearful.”
It’s Time To Rethink Passive Investing
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That realization hits like a lightning bolt when you realize not just how much better your returns could be, but that there are amazing offers like one app where new self-directed investing accounts funded with as little as $50 can receive stock worth up to $1,000.
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