The billionaire investor has long compared Apple, Berkshire’s largest holding company, to a consumer products company.“The stock purchase of a technology company may represent a different kind of mentality at Berkshire, but it is not a total departure from the value investing model,” said Steve Sosnick, chief strategist at Interactive Brokers.
The mood of confidence comes as broader sentiment on technology has turned cautious, with several business leaders and experts warning that the AI frenzy driving up tech stock prices has disconnected valuations from fundamentals and returns on 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, is little changed since September after outperforming the benchmark S&P 500 for much of the year.
ALPHABET GLITTERS UNDER MAG 7
Still, Alphabet is an outlier: its shares are up nearly 14% in the December quarter so far, making it the year’s best-performing member of the “Magnificent Seven” with a 46% gain. The company also trades on a lower multiple, at about 25 times trailing-12-month earnings estimates, compared to Microsoft’s 29 times and almost 30 for Wall Street darling Nvidia, according to LSEG data.
“Alphabet fits the value investing theme better than some of the other names currently leading the AI charge,” Sosnick said.
Several analysts say Alphabet has a leading position in AI thanks to growing infrastructure investments, strong early adoption of AI search tools and a huge advertising business that can fund data center spending.
“This move affirms Google’s strong fundamentals and provides Berkshire with exposure to a leading AI provider through the expansion of Google Cloud and Gemini,” 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 results showed that AI investments were turning Google Cloud, which once operated, into a key growth engine.
Buying Alphabet stock would also address long-standing regrets from Buffett and late Vice Chairman Charlie Munger about missing out on Google early, just before the “Oracle of Omaha” prepares to pass the CEO role to Greg Abel at the end of 2025.
It was unclear whether the Google purchase was made by Buffett, portfolio managers Todd Combs or Ted Weschler, or Abel, although Buffett typically oversees Berkshire’s largest investments.
BERKSHIRE’S SELECTIVE BETTINGS
Based on early trading, Alphabet should add about $180 billion to its market value if profits hold up.
Stocks often rise when Berkshire unveils new positions, thanks to Buffett’s perceived endorsement.
Berkshire’s move, disclosed in a filing Friday, also attracted interest from retail traders, pushing Alphabet into the top three trend stocks on investor platform Stocktwits.
Overall, Berkshire remained a net seller of stocks in the September quarter, further reducing its positions in Apple and Bank of America, pushing its cash hoard to a record $381.7 billion.
Some investors see the build-up of Berkshire’s cash reserves as a sign that Buffett believes valuations are too high.
The company’s stock portfolio remains heavily focused on financial services, which represented 36.6% of stocks in September, according to Morningstar.
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