The purchase of 17.85 million Alphabet shares – worth about $4.93 billion as of close on Friday – is one of the final major investments by the conglomerate under Warren Buffett and marks a rare foray into the industry by tech-averse Berkshire.
The billionaire investor has long compared Apple, Berkshire’s largest holding, to a consumer products company.
“The stake purchase of a tech company may represent a different type of mentality at Berkshire, though it’s not a total departure from its value-investing model,” said Steve Sosnick, chief strategist at Interactive Brokers.
The vote of confidence comes as broader sentiment on tech has turned cautious, with several business leaders and experts warning that the AI frenzy driving up tech stock prices has detached valuations from fundamentals and that returns from hundreds of billions in data-center spending remain uncertain.
The Roundhill Magnificent 7 ETF, which tracks the biggest tech stocks such as Nvidia, Microsoft and Alphabet, has been little changed since September, after outperforming the benchmark S&P 500 for much of the year.
ALPHABET SHINES AMONG MAG 7
Still, Alphabet has been an outlier, with its shares rising nearly 14% so far in the December quarter to make it the year’s best-performing “Magnificent Seven” member with a 46% gain.The company also trades at a lower multiple, at about 25 times 12-month-forward earnings estimates, compared with Microsoft’s 29 times and nearly 30 for Wall Street darling Nvidia, according to LSEG data.
“Alphabet fits the value-investing theme better than some of the other names that are leading the AI charge right now,” Sosnick said.
Several analysts say Alphabet has a leading position in AI due to its growing infrastructure investments, strong early adoption of AI search tools and a massive ad business that can fund its data-center spending spree.
“The move validates Google’s strong fundamentals and provides Berkshire exposure to a leading AI provider through Google Cloud and Gemini expansion,” said CFRA analyst Angel Zino, adding that Alphabet’s cash flow and valuation likely gave the conglomerate “more comfort” in its decision.
Investors piled into the stock last month, after earnings showed AI investment was turning Google Cloud, once an also-ran, into a key growth engine.
Buying Alphabet shares would also address Buffett and the late Vice Chairman Charlie Munger’s long-standing regret over missing Google early, just before the “Oracle of Omaha” readies to pass on the CEO role to Greg Abel at the end of 2025.
It was unclear if the Google purchase was made by Buffett, portfolio managers Todd Combs or Ted Weschler, or Abel, though Buffett typically oversees Berkshire’s largest investments.
BERKSHIRE’S SELECTIVE BETS
Based on early trading, Alphabet was set to add around $180 billion to its market value, if the gains hold.
Shares often jump when Berkshire reveals new positions, thanks to Buffett’s perceived seal of approval.
Berkshire’s move disclosed in a filing on Friday also drew interest from retail traders, pushing Alphabet into the top-three trending stocks on investor platform Stocktwits.
Overall, Berkshire continued to be a net seller of stocks in the September quarter, further trimming its position in Apple and Bank of America to swell its cash pile to a record $381.7 billion.
Some investors see Berkshire’s cash reserve buildup as a sign that Buffett believes valuations are too high.
The company’s equity portfolio remains heavily tilted towards financial services, which accounted for 36.6% of the holdings as of September, according to Morningstar.
