US stocks are going through quite a rough patch at the moment but that might be music to the ears of Warren Buffett.
The billionaire investor had seemingly predicted that the stock market was heading towards a price correction for some time now. After all, President Trump has frequently talked about the prospect of tariffs during and after his electoral campaign. And pairing this with rising stock valuations, there were some early warning signs of volatility ahead.
Looking back, this could explain why, in 2024, Buffett was actually a net seller of stocks, taking $134bn worth of equities out of Berkshire Hathaway‘s investment portfolio. And as a result, Berkshire now has a record $334bn pile of cash sitting on the sidelines.
Being cash-rich during a time of crashing prices is a powerful advantage. After all, it provides ample flexibility to buy top-notch stocks at a discount. And it’s a tactic that Buffett has been using for decades. In fact, going all the way back to 1986, his shareholder letter stated: “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful”.
Using the Buffett method
Capitalising on stock market volatility doesn’t mean just buying up shares in businesses that have been beaten to a pulp. Buffett’s notorious for investing only in high-quality companies when the valuation’s reasonable and attractive. That’s something I also prefer to do for my own portfolio.
Determining which companies are top-notch is easier said than done. But investors can cheat a bit by simply looking at the stocks already in the Berkshire Hathaway portfolio. And right now, that list includes Amazon.com (NASDAQ:AMZN).
Buffett first invested in the e-commerce giant back in 2019. And across all his transactions, the average buying price per share sits close to $84.22. Even after the stock’s recent volatility, Buffett has still more than doubled his investment. But with the stock down almost a quarter since the start of 2025, is this a new buying opportunity?
The bull and bear case for Amazon
In terms of revenue generation, the bulk of Amazon’s top line comes from its e-commerce platform. However, when digging into the profits, I see that the cloud-focused side of the business is actually driving growth.
Amazon Web Services (AWS) account for roughly half of the group’s operating income despite only generating 15% of the revenue. And with artificial intelligence (AI) and cloud spending expected to surge over the next decade, the opportunities for this business continue to be enormous.
However, like every business, there are risks to consider. A tariff-induced trade war could trigger recessions that hamper consumer spending. That’s bad news for both sides of the business since economic activity would suffer, leading to less demand for its cloud services and lower order volumes in its marketplace.
Since Buffett’s focused on the long term, the short-term disruptions of tariffs may not be too concerning. However, it’s worth pointing out that Amazon shares still trade at a valuation Buffett may consider to be lofty, at 25 times forward earnings.
Is this a fair price? Time will tell. However, given the volatility in the markets right now, taking a dollar-cost averaging approach may be prudent for investors considering buying Amazon shares in the current climate.
