Warren Buffett ahead of the Berkshire Hathaway Annual Shareholder Meeting in Omaha, Nebraska, in 2023.
David A. Grogan | CNBC
Alphabet shares jumped Monday after Warren Buffett’s Berkshire Hathaway revealed a new stake in the Google parent, marking one of the conglomerate’s most significant technology bets in years.
Alphabet shares were up about 3%, bucking some weakness in most technology shares to start the week.
A quarterly 13F filing showed Berkshire owned roughly $4.3 billion worth of Alphabet as of Sept. 30, making it the firm’s 10th largest equity holding. The move surprised many Buffett watchers given the billionaire’s decades-long hesitation toward high-growth tech companies. Buffett has always seen Apple, Berkshire’s largest holding, as a consumer products company.
The Alphabet investment likely came from one of his two lieutenants, Todd Combs or Ted Weschler, who increasingly influence Berkshire’s $300 billion stock portfolio. Though its size suggests it likely had the blessing of Buffett, who is stepping down as CEO at the end of this year. The pair have been responsible for many of Berkshire’s tech-leaning investments, including a stake in Amazon initiated in 2019. Berkshire still owns $2.2 billion worth of Amazon today.
Alphabet has been one of the stock market’s biggest winners this year, rising 46% as investors reward its accelerating artificial intelligence push and rapidly improving cloud profitability. Revenue growth from Google Cloud, once a margin drag, has turned into a key earnings driver.
Changing of the guard?
Bill Stone, Glenview Trust Company’s chief investment officer, said the Alphabet purchase could reflect a broader approach to technology investments as leadership transitions to the next generation.
“Perhaps the purchase of Alphabet signals a widening of the circle of competence into technology,” Stone said.
Longtime lieutenant Greg Abel is set to take the reins for 95-year-old Buffett in January. The Oracle of Omaha will remain chairman of the board.
Despite the stellar rally in 2025, Alphabet’s valuation remains lower than many of its AI-driven megacap peers. The stock trades at 26.9 times next year’s earnings, compared with Microsoft at 31.8, Broadcom at 40.7 and Nvidia at 31.8, according to FactSet.
That relative discount, combined with Alphabet’s massive cash flow and dominant market position, may have made the shares particularly attractive to Buffett’s team.
“We think Berkshire likely finds more comfort investing in GOOG over other tech plays given the high free cash flow potential of its core business coupled with an attractive valuation at about 22x 2027 EPS amid a healthy top-line growth trajectory,” Angelo Zino, Alphabet analyst at CFRA, said in a note to clients.
Alphabet year to date
Buffett has admitted missing Google was one of his biggest investing mistakes. He had a front-row seat: Geico, Berkshire’s auto insurance unit, was one of Google’s earliest major advertisers. The company paid about $10 every time a user clicked one of its search ads in the early days of online marketing.
“I had seen the product work, and I knew the kind of margins [they had],” Buffett said in 2018. “I didn’t know enough about technology to know whether this really was the one that would stop the competitive race.”