The September-quarter purchase of 17.85 million Alphabet shares – worth about $4.93 billion – also marked a rare tech bet by Berkshire, famously averse to companies Buffett has said he cannot understand or predict. The billionaire investor has long compared Apple, Berkshire’s largest holding, to a consumer products company. 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 MAGNIFICENT 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” stock 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.
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.
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 the CEO role to Greg Abel at the end of 2025.
“We screwed up,” Munger had said at Berkshire’s shareholder meeting in 2019 about not investing in Google earlier.
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 $160 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.
