Alphabet rallies after Berkshire reveals its stake. Why Buffett’s company probably bought it
Warren Buffett before Berkshire Hathaway’s annual shareholder meeting in Omaha, Nebraska, in 2023.
David A. Grogan | CNBC
Alphabet stocks jumped Monday after Warren Buffett’s Berkshire Hathaway revealed a new stake in parent company Google, marking one of the conglomerate’s biggest tech bets in years.
Alphabet shares rose 5% in morning trading, offsetting some weakness in most tech stocks earlier in the week.
A quarterly 13F filing shows Berkshire owned about $4.3 billion of Alphabet as of Sept. 30, making it the company’s 10th largest holding. The move surprised many Buffett watchers given the billionaire’s hesitation toward high-growth technology companies for decades. Buffett has always viewed Apple, Berkshire’s largest holding company, as a consumer products company.
Alphabet’s investment likely came from one of its two lieutenants, Todd Combs or Ted Weschler, who increasingly influence Berkshire’s $300 billion stock portfolio. Although its size suggests it probably had the blessing of Buffett, who will step down as CEO at the end of this year. The two men are behind many of Berkshire’s technology investments, including a stake in Amazon launched in 2019. Berkshire still owns $2.2 billion of Amazon today.
Alphabet has been one of the stock market’s biggest winners this year, rising 46% as investors reward its acceleration of artificial intelligence and rapidly improving cloud profitability. Google Cloud’s revenue growth, once a drag on margins, has become a key driver of profits.
Change of guard?
Bill Stone, chief investment officer of Glenview Trust Company, said the Alphabet purchase could reflect a broader approach to technology investments as leadership transitions to the next generation.
“Perhaps the purchase of Alphabet marks a widening of the circle of competence toward technology,” Stone said.
Longtime lieutenant Greg Abel is expected to take the reins from Buffett, 95, in January. The Oracle of Omaha will remain chairman of the board.
Despite 2025’s dramatic rebound, Alphabet’s valuation remains lower than many of its AI-driven mega-cap peers. The stock trades at 25.5 times next year’s earnings, versus Microsoft at 32.0, Broadcom at 50.8 and Nvidia at 41.9, according to FactSet.
This relative discount, combined with Alphabet’s massive cash flow and dominant market position, may have made the stock particularly attractive to Buffett’s team.
“We believe Berkshire is likely more comfortable investing in GOOG than other technology stocks given the high free cash flow potential of its core business, coupled with an attractive valuation of ~22x 2027 EPS amid healthy top-line growth,” Angelo Zino, Alphabet analyst at CFRA, said in a note to clients.
Alphabetical year to date
Buffett admitted that 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 first major advertisers. The company paid about $10 every time a user clicked on one of its search ads in the early days of online marketing.
“I had seen the product work and I knew the type of margins [they had]” Buffett said in 2018. “I didn’t know enough about the technology to know if it was really the one that would stop the competitive race.”
