Berkshire Hathaway Has Plowed Over $21 Billion Into This Artificial Intelligence (AI) Stock Since Warren Buffett Stepped Down

Had you invested $1,000 in the Berkshire Hathaway (NYSE: BRKA)(NYSE: BRKB) holding company when Warren Buffett became chief executive in 1965, it would have turned into a staggering $48 million by the time he stepped down at the end of 2025. The same investment in the S&P 500 index would have grown to just $399,700 over the same period.

Berkshire owns numerous subsidiaries, a $337 billion portfolio of publicly traded stocks, and a massive $397 billion pile of cash. Buffett's chosen successor, Greg Abel, took over as CEO at the start of 2026, and he has plenty of resources at his disposal to extend the conglomerate's incredible run of market-beating returns.

Abel is already swinging for the fences, having acquired around 65 million shares in Google parent Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) since the start of the year, worth roughly $21.6 billion (by my estimate). He has effectively more than quadrupled Berkshire's position, and here's why it might be a winning move over the long term.

Image source: The Motley Fool.

Artificial intelligence is transforming Google Search

Artificial intelligence (AI) chatbots offer a fast and convenient way to find information online, so investors were initially worried they would pose a threat to traditional internet search engines like Google Search. But Alphabet developed a series of new AI-powered features to create the ultimate hybrid search experience, and the company says they are driving growth in the platform overall.

AI Overviews combine text, images, and links to third-party sources to provide an AI-generated answer when users type a query into Google Search. These responses appear above the traditional search results, saving users from sifting through web pages to find answers. Then there is AI Mode, which opens a chatbot-style interface where users can expand on their original query by asking additional questions.

When users enter more queries into Google Search, they see more ads, and Alphabet makes more money. As a result, the platform generated a record $60.4 billion in revenue during the first quarter of 2026, which was a 19% increase from the year-ago period. It was the fourth straight quarter of accelerating growth, so AI appears to be fueling significant momentum.

Google Cloud is producing explosive growth

Google Cloud offers businesses all the necessary tools to develop and deploy AI software, from computing capacity to ready-made AI models. Its centralized data centers are fitted with thousands of graphics processing units (GPUs) from top suppliers like Nvidia, but to provide customers with some variety, it also designed its own chips called Tensor Processing Units (TPUs).

Google Cloud recently unveiled its eighth-generation TPUs, the most powerful yet. The 8t delivers three times as much performance in AI training workloads compared to the previous generation, while the 8i provides an 80% improvement in performance-per-dollar in inference workloads. These TPUs are so good that some AI customers are actually buying them for their own data centers, creating an entirely new revenue stream for Alphabet.

Google Cloud generated a record $20 billion in total revenue during the first quarter, which was a blistering 63% increase from the year-ago period. It grew much faster than cloud competitors like Amazon Web Services and Microsoft Azure, which saw revenue increases of 28% and 40%, respectively, in their most recent quarters.

But even faster growth could be around the corner for Google Cloud, because its order backlog nearly doubled sequentially to $462 billion during the first quarter, as customers line up around the block for more computing capacity.

Alphabet stock is still cheap

Even though Alphabet stock doubled over the last 12 months, its price-to-earnings (P/E) ratio is just 27.4. That is a notable discount to the Nasdaq-100 index, which trades at a P/E ratio of 34.6, suggesting Alphabet might still be undervalued compared to a basket of its big-tech peers.

Warren Buffett is a textbook value investor. He targeted companies he perceived as cheap, as long as they generated steady growth and reliable earnings, and had strong management. He was never afraid to be aggressive when he found an opportunity he liked; he put a whopping $38 billion into Apple between 2016 and 2023, and it paid off spectacularly because the position was worth north of $170 billion in early 2024.

Greg Abel worked with Buffett at Berkshire for over two decades before taking on the CEO role, so it's no surprise he's following in his predecessor's footsteps with the big investment in Alphabet. This probably won't be his last bold move, given Berkshire's enormous cash pile.

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, and Nvidia. The Motley Fool has a disclosure policy.