Here's Why Warren Buffett Changed His Mind About Tech Stocks

It's no secret that Warren Buffett, one of the greatest investors in history, long avoided technology stocks while CEO of Berkshire Hathaway. Buffett was never shy about admitting that he didn't understand tech.

But eventually he started putting the conglomerate's money into tech. Here's a look at what it took for the Oracle of Omaha to add tech to his impressive portfolio.

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Buffett's general philosophy

Warren Buffett taught a lot of investors a lot of things over the decades. Here are three points that stand out to me.

1. Keep it simple: Stick with businesses and industries that you could easily explain to a child. In Buffett's words, "Never invest in a business you cannot understand."
2. Have patience: Buffett once said, "If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes." Committing to a stock for the long term typically only happens after you have taken the time to get to know the company. Plus, holding an asset for the long term gives it time to benefit from decades of compounding.
3. A 90/10 rule can be a great choice for those who aren't interested in picking stocks: Allocate 90% of your money to a low-cost S&P 500 index fund and the remaining 10% to short-term government bonds is a sound way to invest.

What's changed in recent years

I can see why Buffett loosened his opposition to tech stocks over the years. Some large tech platforms now fit his traditional criteria of businesses that are understandable and have durable moats.

Of course, Buffett and Berkshire didn't invest in every technology company. I think Buffett looked for ones he thoroughly understood. With his habit of looking for "moats over momentum," he surely had no interest in hyped-up flashes in the pan. He wanted to know that the company he invested in had a sustainable competitive advantage that could protect profits over time.

Today, in addition to Apple, you'll find Amazon and Alphabet in Berkshire's portfolio.

For younger investors

When asked in 2023 which sector or asset class he would want to get very knowledgeable about if he were going to live another 50 years, the super-investor's answer was clear: technology. "It's going to be a huge field," the then-92-year-old Buffett said. "There are likely to be a few enormous winners, a lot of disappointments..." and being able to pick the winners could move the needle for Berkshire Hathaway.

While Buffett's opinion of tech has certainly come a long way, he remains dedicated to fully understanding a company before investing a dollar.

Dana George has positions in Amazon and Apple. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, and Berkshire Hathaway. The Motley Fool has a disclosure policy.