Key Takeaways
- Berkshire Hathaway, the conglomerate run by Warren Buffett, took a sizable stake in tech giant Alphabet during the third quarter.
- Alphabet stock is up 70% since the start of the year, making it an unusual addition to Berkshire’s value-oriented stock portfolio.
- The majority of Wall Street analysts are optimistic about Alphabet’s stock, with many raising their price targets after its better-than-expected earnings report last month.
Warren Buffett’s Berkshire Hathaway has placed a big bet on one of the tech’s hottest stocks.
Berkshire (BRK.A)(BRK.B) purchased 17.8 million shares of Alphabet’s Class A stock (GOOGL) in the third quarter, according to a regulatory filing made public earlier this month. A stake of that size in the Google parent would be worth nearly $5.7 billion as of Monday’s close.
Alphabet is an unusual purchase for Berkshire, which tends to buy unloved stocks with the intention of holding them long term.
Alphabet, meanwhile, is far from unloved. The stock soared more than 6% Monday after Salesforce CEO Marc Benioff praised its Gemini 3 AI model, saying he was “never going back” to using rival OpenAI’s ChatGPT. Later Monday, news reports—first published by The Information—indicated that it might sell AI chips to Meta Platforms (META), further strengthening investors’ sense of the company’s position. Alphabet shares added nearly 2% on Tuesday.
Why This News Is Significant
Berkshire Hathaway is known for investing in companies with slow-and-steady businesses and, in the firm’s opinion, undervalued stocks, making its Alphabet purchase a relatively unusual one.
Not only is Alphabet a member of the Magnificent Seven—the high-flying set of tech stocks whose valuations have spooked investors of late—it’s also the best-performing member of the group by a long shot this year. Shares are up about 70%, more than double Nvidia’s (NVDA) year-to-date return as of Tuesday’s close.
Alphabet isn’t the only Mag 7 stock in Berkshire’s portfolio. Apple (AAPL) is the conglomerate’s largest stock holding, worth about $65.7 billion. But it first bought Apple stock in 2016 and has been trimming that position for the past two years. Berkshire sold about 15% of its stake in the iPhone maker last quarter.
What Wall Street Thinks of Alphabet
Analysts are generally bullish on Alphabet stock.
JPMorgan analysts raised their price target by 13% after the company reported better-than-expected third-quarter results late last month. The analysts called the report “strong across the board,” and noted Alphabet was showing “signs that AI search is more opportunity than threat,” contrary to Wall Street’s expectations. Analysts at Wedbush also raised their price target, and argued the quarter “validates Alphabet’s position as a leading AI beneficiary.”
Alphabet also raised its full-year capital expenditures guidance last month. It expects to invest more than $90 billion in capital equipment this year, with much of that going toward building data centers and filling them with chips to train and run AI models. Investors have recently grown wary of tech’s AI spending, with some wondering when they’ll see a return on their investments, if at all.
Regardless, 12 of the 15 analysts with current ratings tracked by Visible Alpha rate shares a “buy,” and the remainder recommend holding the stock. Their average price target of $324 is right about where the stock closed on Tuesday.
UPDATE: This article has been updated to include the latest stock price information.
