Warren Buffett before Berkshire Hathaway's 2023 annual meeting in Omaha, Nebraska.
David A. Grogan | CNBC
alphabet Stocks rose on Monday following Warren Buffett's Berkshire Hathaway announced a new stake in Google parent company, marking one of the conglomerate's most significant technology bets in years.
Alphabet shares rose 3.1%, defying weakness in most technology stocks at the start of the week.
A quarterly 13F filing showed that Berkshire owned Alphabet worth about $4.3 billion as of September 30, making it the company's 10th-largest holding. The move surprised many Buffett watchers, given the billionaire's decades-long reticence toward high-growth technology companies. Buffett has always viewed Apple, Berkshire's largest holding, as a consumer goods company.
The Alphabet investment likely came from one of his two deputies, Todd Combs or Ted Weschler, who are increasingly influential in Berkshire's $300 billion stock portfolio. Although its size suggests it likely had the blessing of Buffett, who is stepping down as CEO at the end of this year. The pair were responsible for many of Berkshire's technology-focused investments, including a stake in Amazon initiated in 2019. Today, Berkshire still owns Amazon worth $2.2 billion.
Alphabet has been one of the stock market's biggest gainers this year, rising 46% as investors reward its increasing push into artificial intelligence and the rapidly increasing profitability of the cloud. Google Cloud's revenue growth, once a margin squeeze, has become a key earnings driver.
Changing of the guard?
Bill Stone, chief investment officer of Glenview Trust Company, said the purchase of Alphabet could reflect a broader approach to technology investing as leadership passes to the next generation.
“Perhaps the purchase of Alphabet signals an expansion of the circle of expertise into technology,” Stone said.
Longtime Lieutenant Greg Abel is expected to take over from the 95-year-old Buffett in January. The Oracle of Omaha remains chairman of the board.
Despite the stellar rally in 2025, Alphabet's valuation remains lower than many of its AI-driven mega-cap peers. In comparison, the stock trades at 26.9 times next year's earnings Microsoft at 31.8, Broadcom at 40.7 and Nvidia according to FactSet at 31.8.
This 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 believe Berkshire will likely find more comfort investing in GOOG than other technology companies given the high free cash flow potential of its core business, coupled with an attractive valuation of approximately 22 times 2027 earnings per share and a healthy revenue growth trajectory,” Angelo Zino, Alphabet analyst at CFRA, said in a note to clients.
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Alphabetical year to date
Buffett has admitted that missing Google was one of his biggest investing mistakes. He had a front row seat: Geico, Berkshire's auto insurance division, was one of Google's first major advertisers. In the early days of online marketing, the company paid about $10 every time a user clicked on one of its search ads.
“I had seen the impact of the product and knew the nature of the margins [they had]” Buffett said in 2018. “I didn't know enough about technology to know if this was really the one that was going to stop competition.”