Under new CEO Greg Abel, Berkshire Hathaway has significantly increased its investment in Alphabet, purchasing approximately $23 billion in shares since the start of the year. This move follows a pattern of high-conviction, long-term investments seen historically with companies like Apple and Visa.
Alphabet’s strong financial performance, particularly in its booming cloud and AI infrastructure businesses, coupled with an attractive valuation, makes it a compelling investment. Berkshire’s continued interest suggests potential for further accumulation of Alphabet shares.
Berkshire Hathaway (BRKA, BRKB) has embarked on a new chapter this year, with Warren Buffett transitioning from CEO to Chairman, handing the reins to Greg Abel. In his brief tenure, Abel has already overseen significant investment decisions, notably a substantial acquisition of approximately $23 billion in Alphabet (GOOG, GOOGL) shares since the beginning of the year.
Berkshire Hathaway's initial investment in Alphabet occurred in the third quarter of 2025, a move confirmed to be initiated by Warren Buffett himself. However, the article suggests that Abel and his team are likely to increase their stake in the tech giant in the coming quarters, presenting a compelling case for investors to consider following suit.
A Pattern of High Conviction
Greg Abel has pledged to maintain Warren Buffett's long-term, buy-and-hold investment philosophy. Historical data from Berkshire Hathaway supports the notion that high conviction in a company often leads to repeated, sustained buying over extended periods. A prime example is Apple, currently Berkshire's largest holding, in which the conglomerate steadily increased its stake from the first quarter of 2016 through the end of 2018.
Similarly, Berkshire Hathaway demonstrated a consistent interest in Visa between 2011 and 2016, engaging in nine purchases with intermittent sales. This pattern is also observable with other significant investments, such as Occidental Petroleum. The repeated accumulation of shares in these past high-conviction companies suggests a strong likelihood that Berkshire Hathaway will continue to invest in Alphabet, especially given that recent purchases already position it among the company's top holdings, including a $10 billion private placement.
Alphabet's Financial Strength and Growth Potential
Alphabet's recent financial performance has been exceptionally strong. In the second quarter, the company reported a 24% year-over-year revenue increase to $119.8 billion and a 30% surge in operating income to $40.8 billion. Earnings per share rose significantly to $9.11, up from $2.31 in the prior year, partly due to gains from equity investments, though underlying operational strength is evident.
The remarkable growth is significantly driven by Alphabet's cloud computing business, which saw sales jump 82% year-over-year to $24.8 billion. With a cloud backlog of $514 billion, Alphabet, despite having the third-largest market share among major cloud providers, is a leader in AI infrastructure and data analytics. This burgeoning demand for AI-related services is fueling the company's impressive sales trajectory, with projections indicating sustained growth in AI infrastructure spending for years to come.
While some investors express concerns about Alphabet's substantial projected capital expenditures for AI ($195 billion to $205 billion this year) and a negative free cash flow in the second quarter, the company's robust financial results and massive cloud backlog provide a strong justification for these investments. Beyond its cloud division, Alphabet's core advertising segment remains a powerful engine, bolstered by its dominant position in internet search and a strong competitive advantage through network effects—a key criterion for Buffett.
Furthermore, Alphabet's valuation appears attractive. Trading at approximately 18.1 times forward earnings, it is priced below the average of 20 times for information technology stocks and represents the lowest forward price-to-earnings ratio among the Magnificent Seven companies. This relative undervaluation, combined with its strong fundamentals and growth prospects, makes Alphabet a compelling investment, with Berkshire Hathaway's continued interest signaling potential upside for retail investors as well.
