Warren Buffett, chairman and CEO of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) has been managing investments for his company for roughly 60 years. For much of that time, he largely avoided trading in technology stocks, once stating:

Technology is based on change; and change is really the enemy of the investor. Change is more rapid and unpredictable in technology relative to the broader economy. To me, all technology sectors look like 7-foot hurdles.

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But there are always exceptions to the rule, and Berkshire Hathaway started buying Apple (NASDAQ: AAPL) stock in 2016 and invested in Amazon (NASDAQ: AMZN) beginning in 2019. These are two of the world's largest tech companies. Let's take a look at Buffett's seeming contradiction and maybe also determine whether these two blue chip stocks might fit into your portfolio.

Image source: The Motley Fool.

Amazon invests in innovation to prolong its strong growth

Berkshire's stake in Amazon is a relatively small position in its nearly $285 billion stock portfolio (about 0.8%), valued at approximately $2.2 billion. It's likely that it was initially purchased in 2019 by one of Buffett's lieutenants. Nonetheless, Buffett has previously joked that he was "an idiot for not buying" the stock sooner.

Amazon's stock price has struggled of late, down about 1% so far in 2025 as it ramps up its capital expenditures to keep up in the artificial intelligence (AI) arms race. Amazon CFO Brian Olsavsky said capital expenditures could exceed $100 billion in 2025, driven by investments in data centers, chips, and AI infrastructure. That expense is up significantly from $48.1 billion in 2023 and $77.7 billion in 2024, reflecting the importance management puts on AI.

While the return on investment for AI may take a few years to materialize, Amazon continues to deliver results now. In Q1 2025, Amazon generated $155.7 billion in revenue, a 9% year-over-year increase. As for profitability, one metric Buffett prefers is operating earnings, a measure of a company's direct profits from its core operations that exclude volatile unrealized capital gains and losses resulting from its investments. Amazon delivered $18.4 billion in operating earnings for the quarter, representing year-over-year growth of 20.3%.

One area where Amazon's AI return on investment is already showing up is in its Amazon Web Services (AWS) division. Specifically, management projected a $117 billion annual revenue run rate for AWS in 2025, with its Q1 increasing 17% year over year to $29.3 billion. CEO Andy Jassy underscored the growth on the company's most recent earnings call, saying: "Before this generation of AI, we thought AWS had the chance to ultimately be a multi $100 billion revenue run rate business. We now think it could be even larger."

Data by YCharts.

Beyond its earnings growth, the balance sheet is in tremendous shape, with $41.2 billion in net cash. And as for Amazon's valuation, its stock looks undervalued compared to its historical averages. Specifically, Amazon stock trades at 34 times trailing earnings, close to a five-year low and well below its five-year median of 65 times trailing earnings.

Put it all together, and Amazon is the rare company that isn't afraid to invest in innovation to prolong its growth phase. It can afford to do so with a strong cash position and consistent earnings growth, making it a perfect buy-and-hold candidate for your portfolio.

2. Apple

Berkshire Hathaway first bought Apple stock in 2016, and despite trimming the position beginning in 2024, it remains the company's largest holding by far (21.2% of the portfolio). At the end of Q1 2025, Berkshire still owned over 300 million shares, worth north of $60 billion. Buffett has previously noted Apple is a "better business than any other we own [outright]."

In many ways, Apple checks every box for Buffett: iconic brand, loyal customers, and enormous cash generation. In its most recent quarter, its fiscal second quarter ended March 29, 2025, Apple generated $90.8 billion in revenue and $29.6 billion in operating income, year-over-year increases of 5% and 6%, respectively. Notably, revenue for the company's flagship product, the iPhone, only grew 2% year over year to $46.8 billion after the company faced a decline in the segment during its fiscal Q1 2025.

While Apple isn't spending as much proportionately as its peers on AI, it isn't ignoring it either. The company developed Apple Intelligence, a free, built-in AI system for its products, which CEO Tim Cook said in a 2024 earnings call "will transform how users interact with technology."

It could also boost its iPhone sales, considering the technology is only available on Apple's relatively newer hardware models, which may prompt more consumers to upgrade from their current devices. Apple hasn't broken out exact figures, but Cook recently noted that markets where the company rolled out Apple Intelligence saw "stronger" performance than those that hadn't.

Data by YCharts.

As investors wait to see demand for Apple Intelligence develop, Apple rewards shareholders through continued share repurchases and dividends. In just the past five years, Apple has reduced its share count by nearly 13%, and more recently announced a $100 billion addition to its share repurchasing program. Buffett has called buybacks a way to benefit all owners, provided they're done at attractive valuations. "The math isn't complicated: When the share count goes down, your interest in our many businesses goes up," he said in a 2022 letter to shareholders. "Every small bit helps if repurchases are made at value-accretive prices."

Additionally, management has consistently paid and raised its dividend for 14 consecutive years. Today, the company pays a quarterly dividend of $0.26 per share, equating to an annual yield of 0.5%. Moreover, considering its payout ratio -- the percentage of earnings paid out as dividends -- is a lowly 16%, investors can reasonably expect annual dividend hikes for the foreseeable future.

Data by YCharts.

Finally, despite the stock's recent decline of roughly 18% in 2025, it trades at 31 times its trailing earnings, slightly above its five-year median of 29 times. While that may give some investors pause, Apple's track record of innovation, shareholder returns, and support from Warren Buffett make a compelling case. For long-term investors concerned about valuation, dollar-cost averaging offers a disciplined way to build a position in one of the most iconic public companies ever.

Should you invest $1,000 in Amazon right now?

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Collin Brantmeyer has positions in Amazon, Apple, and Berkshire Hathaway. The Motley Fool has positions in and recommends Amazon, Apple, and Berkshire Hathaway. The Motley Fool has a disclosure policy.

AppLovin (NASDAQ: APP) stock has had a roller-coaster 2025, reaching an all-time high before being cut in half after it came under scrutiny in a short-seller report. Since then, the stock has recovered most of those losses after the advertising tech company posted blowout earnings and made a bold move to publicly bid on acquiring TikTok.

Let's examine the recent news and determine whether the stock is overhyped or if its lofty valuation is justified.

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AppLovin's growth demands attention

AppLovin recently reported its results for the first quarter of 2025, and the company did not disappoint. Total revenue rose 40% year over year to $1.48 billion, driven by its advertising segment, which matches advertisers and app publishers via auctions at a large scale and microsecond speeds.

The mobile tech company has accelerated its revenue by shifting its primary focus from gaming advertising to the broader global advertising economy, which opens up an opportunity for 10 million advertisers globally, according to management. During the first quarter, the company's advertising revenue increased to $1.16 billion, representing a 71% year-over-year rise.

Meanwhile, AppLovin generated $826 million in free cash flow, a key profitability metric, representing a 114% year-over-year increase. With its positive free cash flow, management has elected to repurchase its stock aggressively rather than pay down its $3.2 billion in net debt. Specifically, the company spent $1.2 billion in the first quarter, nearly $400 more than the company generated in free cash flow. Over the past three years, management has reduced its share count by 9.3%, which not only increases existing shareholders' ownership stake, but also suggests management is bullish on the company's long-term prospects.

In other developments, AppLovin sold its declining mobile gaming division to Tripledot Studios for $400 million in cash, along with an estimated 20% equity stake. The deal is expected to close as early as Q2 2025, further signaling management's confidence in its strategic pivot to advertising.

Enter TikTok

The most headline-grabbing move of 2025, however, wasn't AppLovin's earnings report or the sale of its gaming division; it was when the company disclosed that it is prepared to make a serious offer to acquire TikTok's global operations, should regulatory pressure force a divestiture. The bid would allow Chinese investors to retain a stake in TikTok, while AppLovin would manage its global operations. In CEO Adam Foroughi's words, AppLovin can offer a "much stronger bid than others" thanks to its technical infrastructure, monetization expertise, and real-time ad marketplace.

The price tag would likely be costly for the social media platform, with a reported 1.6 billion global users generating an estimated $23 billion in revenue in 2024. It could also be a lengthy and politically fraught acquisition process. Still, the possible move is exciting for investors to dream about and could spur the next phase of growth for AppLovin, which had a recent market capitalization of $140 billion.

Image source: Getty Images.

The short report and the AppLovin CEO's response

Of course, fast-growing tech companies often attract critics, and AppLovin is no exception. Recent short reports, including one from the investigative investment company Muddy Waters Research, accused AppLovin of violating the terms of service of key platform partners, resulting in an observed 23% client churn rate in the first quarter of 2025.

In an open-letter rebuttal, Foroughi addressed the claims head-on, arguing that "a few nefarious short-sellers are making false and misleading claims aimed at undermining our success." Furthermore, Foroughi called the report "littered with inaccuracies and false assertions," and emphasized that the company operates in full compliance with App Store policies, stressing that "there has been no churn" among its advertising clients.

For investors, it's important to understand that companies publishing short reports typically hold short positions in the companies they investigate. This means they are financially incentivized to release negative research -- whether or not it's fully substantiated. Notably, AppLovin's stock dropped nearly $66 to $261.70 per share after the report was published in March, but has since recovered and then some to over $414 per share as of this writing.

Is AppLovin a buy, sell, or hold?

Before buying any stock, it's essential to consider its valuation -- especially with high-growth tech companies, which often trade at premium levels due to their long-term potential. AppLovin is no exception, currently trading at 56.6 times its trailing-12-month free cash flow of $2.5 billion. However, that premium appears more reasonable given that free cash flow has grown nearly 80% year over year. The stock is also trading about 33% below its peak price-to-free-cash-flow multiple, suggesting a slight discount for new investors.

For growth investors who think long-term and believe in the power of scalable software and monetization, AppLovin remains a buy, regardless of whether or not TikTok is involved.

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Collin Brantmeyer has positions in AppLovin. The Motley Fool has positions in and recommends AppLovin. The Motley Fool has a disclosure policy.

Tech stocks have taken investors on a wild ride in 2025, with tariffs, interest-rate jitters, and a new presidential administration fueling market volatility. But while many are running for the exits, savvy investors know that short-term chaos can create long-term opportunity.

Here are a few of those stocks -- trading at significant discounts -- that are worth a closer look while Wall Street catches its breath.

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1. AppLovin

AppLovin (NASDAQ: APP) provides technology and tools to help mobile app developers effectively market, monetize, and grow their apps. The stock trades recently traded around $270 per share and has increased by more than 300% since its initial public offering in 2021.

Yet the stock is down roughly 23% in 2025, in part due to the investigative investment firm Muddy Waters Research releasing a short report on the company claiming that AppLovin appears to be violating the platforms' terms of service. As a result, Muddy Waters believes AppLovin could lose business to competitors, claiming a 23% client churn rate in the first quarter 2025.

AppLovin CEO Adam Foroughi pushed back against the short report, describing it as "littered with inaccuracies and false assertions." Foroughi emphasized that the company operates in full compliance with App Store policies and stressed that its business is "based on transparency and integrity."

AppLovin delivered strong financial results in 2024, generating $4.7 billion in revenue and $2.1 billion in free cash flow -- marking year-over-year increases of 43.4% and 100%, respectively. The company has been putting its free cash flow to work by buying back stock, reducing its shares outstanding by 10% over the past three years. As of the end of 2024, it still has $2.3 billion remaining under its share repurchase program.

APP Price to Free Cash Flow data by YCharts

AppLovin's valuation may look steep at first glance -- trading at 43.6 times free cash flow -- but high multiples are par for the course in the world of tech and growth stocks, where investors pay for future potential. What makes AppLovin stand out is its rapid growth: With free cash flow doubling in 2024, the premium looks far more palatable. Plus, the stock is currently trading about 50% below its peak price-to-free cash flow multiple, making this high-growth company look like a bargain.

2. Nvidia

Arguably, at this stage of the artificial intelligence (AI) boom, Nvidia (NASDAQ: NVDA), a chip supplier, has been the largest beneficiary. It provides the ecosystem of software and materials to support AI development. After its stock skyrocketed over the past few years, Nvidia briefly became the world's most valuable publicly traded company.

Since then, the stock has cooled to $104 per share, falling more than 30% from its peak of $153 per share. Despite the price fluctuations, the business is humming along.

In fiscal 2025, Nvidia generated $130.5 billion in revenue and $72.9 billion in net income, representing an incredible increase of 114% and 145%, respectively, compared to fiscal 2024.

One reason for the recent dip in Nvidia's stock is growing uncertainty around tariffs, which could pressure the company's high gross margin. Nvidia's gross margin, a key indicator of cost efficiency and pricing power, stood at 78.4% in fiscal Q1 2025, but management expects it to decrease to between 70.6% and 71% in fiscal Q1 2026. If that projection holds, it would mark the fourth consecutive quarter of margin contraction.

Addressing the issue during the company's February earnings call, CFO Colette Kress acknowledged the uncertainty around tariffs, saying, "It's a little bit of an unknown, it's an unknown until we understand further what the U.S. government's plan is, both its timing, it's where, and how much."

For a mature company like Nvidia, the price-to-earnings (P/E) ratio remains a widely used valuation tool, measuring a company's stock price relative to its earnings over the past 12 months. Currently, Nvidia trades at 35.6 times trailing earnings -- a figure that might seem steep to traditional value investors. However, when considering the forward P/E ratio, which reflects expectations for the next 12 months of earnings, the valuation appears far more attractive at 23.6 times earnings.

NVDA PE Ratio (Forward) data by YCharts

Looking further ahead, Nvidia CEO Jensen Huang's long-term optimism surrounding the AI revolution helps support the company's valuation. On the company's most recent earnings call, Huang outlined a sweeping vision for the role of AI, stating:

Every fintech company will [use AI]. Climate tech companies use AI. Mineral discovery now uses AI ... every higher education, every university uses AI, and so I think it is fairly safe to say that AI has gone mainstream and that it's being integrated into every application.

Are these discounted tech stocks worth buying?

Whenever the market turns turbulent, growth stocks are often the first to take a hit -- and that's exactly what investors are seeing now. Both AppLovin and Nvidia have delivered explosive growth in recent years, resulting in premium valuations. But with the latest pullback, investors finally have a rare chance to scoop up shares at far more reasonable prices. Given the long-term tailwinds behind mobile advertising for AppLovin and the surge of AI for Nvidia, this moment of market uncertainty could end up being a prime opportunity for investors who can look beyond the next few quarters and focus on the long term.

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Collin Brantmeyer has positions in Nvidia. The Motley Fool has positions in and recommends AppLovin and Nvidia. The Motley Fool has a disclosure policy.