For years, Warren Buffett famously avoided technology stocks, or so the story goes. He once quipped that he wouldn't invest in a business he didn't understand but anyone still clinging to the narrative that he doesn't invest in tech stocks hasn't been paying attention.
Berkshire Hathaway Inc (NYSE: BRK.A)(NYSE: BRK.B) just disclosed a US$4.3 billion stake in Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG), the parent company of Google, YouTube and self driving car company Waymo.
That makes it Berkshire's tenth-largest investment holding and it signals that Buffett (or one of his trusted lieutenants) sees something compelling in the search giant's evolution into an AI powerhouse.
Image source: Motley Fool Editorial
Who's really behind the buy
We don't know for certain whether Buffett himself made the call, or if it came from one of his portfolio managers, Todd Combs or Ted Weschler. Either way, this isn't an impulsive move.
Buffett and his late partner Charlie Munger have previously shared how they regret not buying Google shares sooner. At Berkshire's 2019 annual meeting, Buffett admitted that Google's advertising model was eerily similar to the customer acquisition engine that powered Berkshire's own GEICO insurance business.
So this new stake could be a long-overdue correction and a chance to finally own a piece of the business they have admired from afar.
Why Alphabet makes sense for Berkshire
The notion that Buffett doesn't invest in tech has always been oversimplified. What he actually avoids are businesses he can't predict. When a company has durable advantages, strong cash flows, and sensible management, he's all in; whether it's railroads, insurance, or iPhones.
That's exactly why he bought Apple Inc (NASDAQ: AAPL), which now accounts for roughly $60 billion of Berkshire's equity portfolio, even after recent sales. Apple isn't just a gadget maker, it's a global ecosystem with pricing power and brand loyalty. Alphabet, in many ways, fits the same mold.
It's a dominant platform with diversified revenue streams, incredible reach, and a fortress balance sheet. Alphabet is the same and its also becoming one of the most interesting AI stories on the planet.
Alphabet's AI advantage
Alphabet's critics have long feared it would be left behind in the "AI wars," losing ground as users turn to ChatGPT and other generative AI platforms. But quietly, Google has been fighting back.
Its Gemini AI platform recently overtook ChatGPT as the most downloaded app on both the Apple App Store and Google Play, a reminder that Alphabet's reach and power remains unmatched.
The company is embedding AI across everything from Search to YouTube to Cloud. That creates a self-reinforcing loop: AI enhances user experience, which deepens engagement, which improves data, which strengthens AI again.
It's not flashy. It's methodical and exactly the kind of compounding advantage Buffett admires.
A rare mix: growth and value
Alphabet trades under 30 times forward earnings which is not cheap, but hardly frothy for a growing business with US$74 billion in annual free cash flow.
Could Alphabet be both a growth stock and a value stock? Buffett might think so. The company has the scale, profitability, and competitive moat of a classic Buffett business, just wrapped in the clothing of a 21st-century tech giant.
If you strip away the buzzwords, Alphabet looks less like a Silicon Valley gamble but more like a digital utility and one that's quietly reinventing itself for the AI era.
The bottom line
We'll may never know whether it was Buffett, Todd, or Ted who pulled the trigger but Berkshire's $4.3 billion vote of confidence in Alphabet is telling.
Buffett loves buying great businesses at fair prices and Alphabet might just fit that description. It's resilient, adaptable, and wildly cash-generative.
If this investment turns out to be one of Buffett's last major moves while at the helm of Berkshire, I think there are fewer more deserving companies than Alphabet.
