Berkshire Hathaway as a Defensive Play in a Volatile September Market

September has long been a month of trepidation for investors. Historically, the S&P 500 has averaged a -1.2% return in September since 1928, with global indices like the S&P/TSX Composite and Hang Seng also posting declines [4]. This seasonal weakness is often attributed to institutional “window dressing” and psychological self-fulfilling prophecies [4]. Yet, this year’s context is nuanced: the S&P 500 entered September 2025 with a 1.9% gain in August, and when the index starts above its 200-day moving average, September returns average 1.3% with a 60% positivity rate [2]. Amid this backdrop, Berkshire Hathaway’s strategic positioning—rooted in value preservation and indirect exposure to AI-driven growth—positions it as a compelling defensive play.

Defensive Posture: Cash Reserves and Operational Resilience

Berkshire Hathaway’s $347 billion cash hoard as of May 2025 [4] reflects a disciplined, defensive strategy. This liquidity, accumulated amid a broader market selloff of value stocks in favor of AI-driven tech equities [2], mirrors Warren Buffett’s historical playbook. During the 2008 financial crisis, Berkshire’s $26 billion cash reserve enabled strategic investments in undervalued giants like Goldman Sachs and General Electric, generating outsized returns [1]. Today, the company’s cash reserves provide a buffer against volatility, allowing it to capitalize on dislocations in the market.

Berkshire’s operating earnings also underscore its resilience. Despite a 14% stock decline from May 2025, its core businesses—railroads, utilities, and manufacturing—posted 8% year-over-year profit growth [2]. This operational strength, combined with a diversified portfolio skewed toward consumer staples and energy, insulates the company from the volatility afflicting high-growth sectors. For instance, while the Nasdaq-100 faced its worst quarterly performance in years amid AI overvaluation concerns [4], Berkshire’s stock outperformed the S&P 500 by 20% in a recent turbulent quarter [4].

Navigating AI Hype: Indirect Exposure and Value Preservation

The AI boom has created a stark divide between speculative growth strategies and value preservation. While investors flock to pure-play AI startups and overvalued tech stocks, Berkshire has adopted a “barbell” approach: indirect exposure through established firms with durable moats. Its $291 billion public equity portfolio is concentrated in Apple, Amazon, and American Express—companies leveraging AI to enhance operations without sacrificing predictability [2]. Apple integrates AI into its ecosystem, Amazon’s cloud services power AI tools, and American Express uses machine learning for fraud detection [3]. These investments align with Buffett’s preference for businesses with “strong competitive advantages and predictable cash flows” [4].

Berkshire’s caution contrasts with the speculative fervor driving AI valuations. As one report notes, “the AI bubble” has led to inflated tech stock prices, with the Nasdaq-100’s worst quarterly performance in years signaling a correction [4]. Buffett’s avoidance of direct AI bets—such as Nvidia or OpenAI—reflects his focus on capital preservation over chasing short-term hype [3]. Instead, the company’s energy investments, including grid infrastructure for AI data centers, offer a more stable, indirect pathway to benefit from the sector’s growth [2].

Strategic Positioning for September Volatility

September’s volatility is compounded by macroeconomic uncertainties, including the August jobs report and the Federal Reserve’s mid-September rate decision [2]. The Cboe Volatility Index (VIX) historically spikes in late September, yet it remains unusually low today, suggesting potential upside risk [2]. In such an environment, Berkshire’s defensive traits—substantial cash reserves, diversified operations, and a focus on durable businesses—position it to outperform.

For example, during the 2025 market selloff, Berkshire’s stock gained 17.3% while the S&P 500 lost 6.4% [4]. This outperformance was driven by its reduced exposure to volatile tech sectors and a portfolio weighted toward resilient industries like consumer staples and energy [4]. As Greg Abel prepares to succeed Buffett, the company’s strategic emphasis on capital preservation—evident in its cessation of share repurchases and trimming of Apple’s position [2]—further reinforces its defensive stance.

Conclusion: A Hedge Against Uncertainty

Berkshire Hathaway’s blend of operational resilience, liquidity, and indirect AI exposure makes it a compelling defensive play as September volatility looms. While the broader market grapples with the risks of speculative AI investments and seasonal weakness, Berkshire’s value preservation strategy offers a counterbalance. As Buffett once remarked, “Risk comes from not knowing what you’re doing.” In a world where AI hype and market corrections collide, Berkshire’s disciplined approach ensures it remains a beacon of stability.

Source:
[1] Critical Warning: Warren Buffett's $344 Billion Cash Holdings [https://www.stockpil.com/warren-buffett-cash-holdings-market/]
[2] Berkshire Hathaway shares have dropped 14% since May 2, while the S&P 500 gained 11% [https://www.mitrade.com/insights/news/live-news/article-3-1017367-20250806]
[3] Warren Buffett AI Stocks: Understanding His Stance on AI ... [https://stockstotrade.com/warren-buffet-ai-stocks/]
[4] Nothing new about September slides for stock markets [https://www.rbcwealthmanagement.com/en-us/insights/nothing-new-about-september-slides-for-stock-markets]