For four decades, Warren Buffett refused to buy technology stocks. He famously sat out the entire dot-com bubble, was widely mocked for missing Amazon's compounding decades, and consistently described tech as outside his circle of competence. Then, in 2016, he started buying Apple. By 2024 Apple was Berkshire's largest position by a wide margin, and the cumulative gain was over 100 billion dollars. Around the same time, Charlie Munger bought Alibaba (BABA). The lesson was clear: tech is not the opposite of value investing if you know what to look for.
This post unpacks what changed in Buffett's thinking, what the actual value-investing test for a tech stock looks like, and surfaces 5 tech names that pass the invest-like 7-framework consensus screen today.
What changed with Apple
When Buffett explained the Apple purchase in shareholder Q and A, he was specific: he did not view Apple as a tech company in the speculative-tech sense. He viewed Apple as a consumer products company with a brand moat, switching-cost moat, and high-margin recurring services revenue. The business mechanics resembled Coca-Cola more than they resembled a typical tech start-up.
That distinction is the key. The historical Buffett objection to tech was not that tech companies were bad businesses. It was that:
- The competitive landscape changes too fast to project 10 years of cash flow.
- Many tech companies have no durable moat (innovation lap competitors).
- Stock-based compensation hides the true cost of running the business.
- The valuations imply future dominance that may not materialise.
Apple did not meet these objections by being non-tech. Apple met them by being a tech company whose business mechanics resembled the durable consumer franchises Buffett already understood.
The same logic applies to evaluating any tech stock today. The question is not "is this a tech company." The question is "do this company's business mechanics resemble a durable franchise?"
The 5 actual filters for value investing in tech
Translating the Buffett framework specifically for tech requires emphasising certain criteria:
Filter 1: ROIC above 20 percent for 5+ consecutive years
Tech businesses without true moats have ROIC that compresses fast as competitors copy the product. The 20 percent threshold (higher than the 15 percent general threshold) ensures the moat is real, not just a function of being early.
Apple's ROIC has been above 25 percent for over a decade. Microsoft's has been above 25 percent for 8+ years. Google's similarly. These are the tech businesses where the moat is structural.
Filter 2: Stock-based compensation below 8 percent of revenue
The dirtiest secret of tech accounting is that GAAP earnings often dramatically overstate true profitability because stock-based compensation (SBC) is a real expense that GAAP buries. Many otherwise "profitable" tech companies have SBC equal to 15-25 percent of revenue. If you subtract that as a real cash cost, the GAAP earnings shrink dramatically or disappear.