One of the questions plaguing the stock market over the past few months is whether we might find ourselves in an AI-powered stock market bubble – and when it might burst. As someone who has been through many bubbles over the decades, I believe that billionaire investor Warren Buffett has a lot of wisdom to offer in this regard.

Don’t try to monitor the market over time

Buffett was sitting on gigantic piles of cash at times, leading some to conclude that he was trying to wait for a market downturn large enough to spend. But he’s astute enough to know that no one can time the market with complete certainty – and he doesn’t even try to do so.

Instead, his approach was to buy individual stocks when he believed they were attractively priced, hold them for an extended period of time, and then sometimes sell them.

This can look like market timing because it involves buying shares at prices that look inexpensive. Often a good time to do this is when the stock market crashes.

However, buying opportunities when they arise is not the same as trying to time the market. Buffett didn’t invest in dotcom stocks and then, for example, hope to run away with a large profit before the market peaked.

Stick to what you know and understand

In fact, Buffett didn’t even bother buying internet stocks at the height of the era’s turnaround. He also didn’t buy leading AI shares before he stepped down as CEO Berkshire Hathaway at the turn of this year.

The reason is straightforward, even before we get to the pricing. Buffett likes to stick to what he understands. He long expressed the belief that he did not have the knowledge necessary to assess whether technology companies had the business characteristics he was looking for.

Only years later did he invest IBM AND Apple.

Buffett-style moat

One technology he and his partner Charlie Munger thought they had missed was information Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL).

The reason was that in this case they felt they had insight into Google and did not act on it. Berkshire owned a company that was already running a lot of cash-buying ads on Google, so Buffett and Munger could put two and two together to see Google’s broader potential.

Alphabet has several features that Buffett likes in stocks, and one of them is a “moat.” This is how Bhe describes a competitive advantage that keeps rivals at bay.

Google’s moat consists of immense amounts of user data, proprietary technology, and a proven model for making money not only through search, but also other properties such as YouTube too.

Artificial intelligence poses a risk to Google’s search dominance. This can lead to fewer searches and therefore less advertising revenue. However, this could also represent an opportunity for Alphabet, given the company’s immense amounts of structured information that could facilitate it take advantage of AI itself.

Alphabet has a huge customer base and has proven over time to generate gigantic amounts of cash (although AI costs may reduce this).

But like Buffett, I like to buy great companies at great prices. The current price of Alphabet’s shares is too high for me, so I will not invest.