Warren Buffett's Berkshire Hathaway Owns $41 Billion of Alphabet Stock: Here Are 3 Possible Reasons Why
Key Points
After a $10 billion private placement announced on June 1, Berkshire’s stake in Alphabet makes it the third-largest public equity position.
Incredible profits and cash flow, coupled with a wide economic moat, are characteristics Buffett appreciates.
Alphabet's strong position in various layers of the AI value chain must support Berkshire’s view that the capital expenditures will provide meaningful returns.
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Under the leadership of new CEO Greg Abel, Berkshire Hathaway is making a splash in the technology space. Based on its most recent 13F filing, the conglomerate owned 68,462,015 Class A shares and 17,944,778 Class C shares of Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) as of March 31, which today is valued at $30.7 billion. These two positions combined make up Berkshire's fourth-largest holding in a single company's equity.
On June 1, however, the Omaha enterprise announced a $10 billion private placement into the "Magnificent Seven" stock. With a total position of nearly $41 billion in Alphabet, this is now a bigger position than Coca-Cola. But it's still smaller than Apple and American Express.
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Investors might view these decisions as uncharacteristic of the strategy Berkshire and Warren Buffett have long operated with. This bet makes sense, though.
Here are three possible reasons why the conglomerate is so bullish on Alphabet.
Image source: The Motley Fool.
1. Alphabet is an exceptional business
Berkshire's portfolio consists of high-quality names. Alphabet might be the best business among all the holdings.
It operates from a position of financial strength. Revenue rose 22% year over year to $110 billion in the first quarter (ended March 31), an unbelievable gain for a company of this size. Operating income climbed 30% during that period, resulting in a superb 36% operating margin.
Alphabet is a cash machine. In 2025, it raked in $73 billion in free cash flow. Management uses the windfall to pay a small dividend, with capital also directed toward sizable share buybacks.
Buffett coined the phrase "economic moat." Alphabet's moat has proven to be durable over time, protecting its competitive position. The most notable contributor is a network effect. This shows up in the crown jewel Google Search segment. As a two-sided platform, YouTube also benefits from the same attribute.
2. The valuation isn't excessive
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price," Buffett wrote in Berkshire's 1989 shareholder letter. These words, drafted nearly four decades ago, are still being applied by the conglomerate today. It's almost as if the team at Berkshire read these words before it made the purchases for Alphabet.
Alphabet is an outstanding business, but the valuation hasn't been excessive. Berkshire first bought shares in the third quarter last year. And over the past 12 months, the stock's average price-to-earnings (P/E) ratio is 26.6.
The S&P 500 currently trades at a P/E multiple of 25. Alphabet's slight premium is easily justified.
3. Berkshire is bullish on AI
In the past, Berkshire has shied away from allocating significant capital to technology enterprises. It has owned Apple for more than a decade, to be fair. But the market would agree that Alphabet, a dominant internet business, is a pure tech play, given its different operating segments compared to Apple's focus on consumer products and services.
Now that it owns $41 billion in shares, Berkshire is clearly bullish on artificial intelligence (AI). This is obvious, although it might come as a surprise to market observers. The amount of AI-related spending is unprecedented.
The conglomerate must believe that Alphabet will earn a satisfactory return on the $180 billion to $190 billion in capital expenditures it has planned just in 2026, which will "significantly increase" next year, according to chief financial officer Anat Ashkenazi. The company is involved in many layers of the AI industry, from chips and cloud computing to model development, advertising tools, and user-facing apps. Therefore, it's in a position to monetize all cash outlays.
Berkshire prefers owning stocks forever. Knowing how stringent the filter is for what gets added to the portfolio, the average investor can buy Alphabet shares right now with confidence.
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American Express is an advertising partner of Motley Fool Money. Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, American Express, Apple, and Berkshire Hathaway. The Motley Fool has a disclosure policy.
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