Berkshire Hathaway Just Poured Billions Into One Stock. Here’s Why.
Key Points
Berkshire Hathaway has been aggressively buying shares of Alphabet, the parent of Google.
Alphabet is now Berkshire's fourth-largest investment.
The tech giant has many important qualities that Berkshire loves to see in its investments.
Warren Buffett avoided technology stocks for most of his career, until he built Apple (NASDAQ:AAPL) into Berkshire Hathaway's (NYSE:BRKA)(NYSE:BRKB) largest holding. Now that Buffett has stepped down, new CEO Greg Abel appears to be forming a second major tech holding. According to Berkshire's latest SEC filings, Google parent company Alphabet (NASDAQ:GOOGL)(NASDAQ:GOOG) is now the fourth-largest position in the portfolio, with a stake worth more than $28 billion.
To be sure, we don't know exactly why Greg Abel has been building the Alphabet position, although we know Buffett played an active role in the decision. But here's what investors need to know, and some of the qualities Alphabet has that Buffett loves to see.
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Why did Berkshire buy Alphabet?
As mentioned, Berkshire's leadership hasn't provided the exact reasons for its decision to buy Alphabet. We do know that the position was initiated in Berkshire's portfolio by Warren Buffett himself in late 2025, who said he regretted not buying the Google parent earlier. The more recent buys were Greg Abel's decision, and he hasn't commented publicly about his reasons for the large investments. However, there's a lot about the mega-cap tech giant that fits Berkshire's investment style. https://www.cnbc.com/2026/07/15/warren-buffett-tells-cnbc-he-initiated-berkshire-hathaways-investment-in-alphabet.html
One is cash flow. Alphabet comprises two highly profitable main business segments. Google Services includes the Search business, as well as YouTube, Chrome, Android, Google Maps, Gmail, and most of the other public-facing Google components. Google Cloud is a cloud services platform, and although it's the third-largest player in an essentially three-horse race, it has been gaining share on its competitors, and its revenue has been accelerating sharply in recent quarters.
Another is market leadership. Google Search accounts for about 90% of global search volume. Android is the leading mobile device operating system worldwide. And who doesn't have a Gmail address? As mentioned, Cloud isn't the market leader, but given its impressive growth trajectory, it wouldn't be a shock if it eventually became the leader. After all, Google Cloud revenue grew 82% year-over-year in the second quarter, compared to 37% growth for Amazon's (NASDAQ:AMZN) AWS and 43% growth for Microsoft's (NASDAQ:MSFT) Azure, which are numbers one and two, respectively.
Finally, Alphabet's management has a strong track record of smart, disciplined capital allocation and is willing to pivot to capitalize on opportunities. The company spent more than $200 billion on buybacks over the past four full years, mostly when the stock was significantly cheaper than it is now, and then decided to stop buybacks entirely and pivot to AI infrastructure investment.
Alphabet plans to spend about $200 billion on the AI build-out this year, and given that Google Cloud's year-over-year growth rates over the past four quarters have been 34%, 48%, 63%, and 82%, and the business now has a backlog of over $500 billion, it's tough to argue with management's decision. In fact, $10 billion of Berkshire's investment was made directly from Alphabet when it decided to raise equity capital in June to help fund its AI growth plans.
Will Alphabet become Berkshire's next Apple?
Berkshire has been building out its Alphabet stake over the past few quarters, and while we don't know Abel's future plans, it's worth noting that Berkshire's latest 13-F covered only purchases made before the end of the second quarter (June 30). Berkshire could have potentially bought more Alphabet shares in the two months since.
It wouldn't surprise me at all if Berkshire's Alphabet stake grew significantly larger from here. The stock trades at about 26 times forward earnings, a very reasonable valuation given that its revenue grew by 24% in the most recent quarter.
Matt Frankel, CFP® has positions in Amazon and Berkshire Hathaway. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, and Microsoft. The Motley Fool has a disclosure policy.