Berkshire Hathaway Just Agreed to Put $10 Billion Into Alphabet's AI Build-Out. Should Investors Follow?

It isn't every day that one of the most profitable companies on the planet asks investors for cash. But that is effectively what Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) did earlier this week, announcing a $84.75 billion equity capital raise -- the largest equity raise in U.S. corporate history -- to help fund its enormous artificial intelligence (AI) build-out.

In a notable show of support, Warren Buffett's Berkshire Hathaway (NYSE: BRKA)(NYSE: BRKB) agreed to buy $10 billion of that stock through a private placement.

The move stands out. Alphabet, which generates more cash than almost any company in the world, rarely needs outside money. And Berkshire's commitment is one of the bigger bets new CEO Greg Abel has made since taking the reins from Buffett at the start of the year.

With Berkshire raising its stake in Alphabet, should investors follow suit and invest in the search giant?

Image source: Getty Images.

Why a cash-rich company is selling stock

Alphabet doesn't usually raise equity. Over the trailing 12 months ended March 31, the company generated about $174 billion in operating cash flow, and it closed the first quarter with roughly $127 billion in cash and marketable securities. Businesses sitting on that kind of money typically fund their own spending.

But the scale of what management is planning has changed the math. On its first-quarter earnings call in late April, Alphabet lifted its 2026 capital spending guidance to a range of $180 billion to $190 billion, up from a prior range of $175 billion to $185 billion -- and said 2027 spending should increase significantly from there.

"[W]e are compute constrained in the near term. And as an example, our Cloud revenue would have been higher if we were able to meet the demand," Alphabet CEO Sundar Pichai said during that first-quarter call. Put another way, demand for the company's AI services is running ahead of what its data centers can currently supply.

The new financing comes in three pieces.

The biggest of them -- a $40 billion program to sell shares into the market over time -- is earmarked mostly for an administrative change in how Alphabet covers taxes tied to employee stock awards, not the build-out itself. The $34.75 billion in underwritten public offerings and Berkshire's $10 billion placement supply most of the money actually headed toward AI infrastructure.

What Berkshire may be seeing

The case for all this spending starts with Alphabet's cloud computing business. Google Cloud revenue rose 63% year over year in the first quarter to $20 billion, an acceleration from 48% growth in the fourth quarter of 2025 and 34% in the third quarter. And its backlog of contracted, not-yet-recognized revenue nearly doubled in a single quarter to $462 billion. Additionally, the segment is becoming far more profitable; its operating margin climbed from about 18% a year earlier to roughly 33%.

The core advertising business is holding up, too. Google Search and other advertising revenue grew 19% in the quarter, with management noting that queries are at an all-time high even as AI reshapes how people search. Overall, Alphabet's first-quarter operating income rose 30%.

As of this writing, Alphabet trades at about 28 times trailing earnings. For a company growing revenue more than 20% with an accelerating, increasingly profitable cloud business, that valuation still looks reasonable.

Of course, selling this much stock dilutes existing shareholders -- a worry that nudged shares lower after the announcement. And management has warned that heavy infrastructure spending will keep pressure on profit margins through rising depreciation. Additionally, a pending final judgment on remedies in the Department of Justice's advertising technology antitrust case could also force changes down the road.

Still, the overall picture that emerges is of a company spending aggressively because demand is outrunning supply, not because the business is struggling. And Alphabet is choosing to raise equity opportunistically while maintaining a strong balance sheet.

Berkshire's willingness to commit $10 billion at a moment when some investors are nervous about AI spending reads as a vote of confidence worth noting. To me, Alphabet stock looks attractive here, and I think following Berkshire into the stock -- one that Berkshire has been building a meaningful position in since Q3 2025 -- makes sense.

Daniel Sparks and his clients have positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Alphabet and Berkshire Hathaway. The Motley Fool has a disclosure policy.