Berkshire Hathaway's Greg Abel Just Made a Big Bet on Who Will Win the AI Races -- And He's Even Tipping the Scale in Its Favor

The generative artificial intelligence (AI) revolution is in full force, with agentic AI now catapulting AI-related stocks to new heights.

Still, those who remember the internet boom and bust know that many darlings of that boom didn't become long-term winners. Some even went bankrupt. However, those who eventually emerged as winners of that boom became some of the world's biggest companies, making up most of today's "Magnificent Seven."

Today, the multitrillion-dollar question is, who will be the winner of the AI revolution? Well, Berkshire Hathaway's (NYSE: BRKA) (NYSE: BRKB) Greg Abel just made a big bet that one of the Magnificent Seven internet-era winners will also win the AI races -- and Berkshire's investment itself could help make that bet a reality.

Berkshire triples down on Google

In the first quarter -- Abel's first with total control over Berkshire's investment decisions -- Berkshire more than tripled its investment in Google parent Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL).

In addition to tripling down on Alphabet stock last quarter, Berkshire subsequently said it would buy another $10 billion worth of the $80 billion equity raise that Alphabet recently announced on June 1. That would equate to another 28.6 million shares, increasing Berkshire's stake by another 50%, barring any additional Alphabet purchases made since March 31.

As of this writing, Berkshire's combined 86.7 million shares (that we know about) would amount to about a $30.9 billion stake at today's share price. That would make Alphabet Berkshire's fourth-largest public equity holding, behind only Apple, American Express, and Coca-Cola.

Alphabet has survived, now primed to thrive in AI

Back when Berkshire first established its position in Alphabet, I wrote that the likely reason was a reacceleration in Search-related paid clicks, which occurred in the second quarter of 2025 and was subsequently reported in the third quarter, when Berkshire took its initial position.

Alphabet was the cheapest of the Magnificent Seven stocks at that point due to fears that generative AI could disrupt Google Search, Alphabet's main cash cow. However, after Alphabet innovated and introduced features such as AI Overviews and AI Mode within the Search bar, paid clicks reaccelerated. That appeared to prove that the Search business wasn't going away, thanks to Alphabet's innovation.

However, Alphabet's stock has roughly doubled over the past year, and its valuation has risen accordingly. No longer is Alphabet the typical value investment that investors have come to expect from Berkshire. Berkshire's investment in Alphabet at a high-20s price-to-earnings (P/E) ratio indicates a conviction not only in Alphabet's survival but also its long-term competitive advantage in generative AI.

Image source: Getty Images.

Alphabet's advantage over start-up rivals

Today, three large language models are currently regarded as the most advanced: Gemini by Alphabet, ChatGPT by OpenAI, and Claude by Anthropic. It seems as though Berkshire now believes Alphabet will win the generative AI race.

Both OpenAI and Anthropic are still private and, as of the latest data, remain unprofitable -- although Anthropic is projected to turn an operating profit for the first time this quarter. Still, Alphabet's current profitability, with $160 billion in net income over the past 12 months, dwarfs both companies' financial resources by a lot.

Aside from having much more financial resources, Alphabet also has another big cost advantage: It builds its own data centers and designs its own chips, called Tensor Processing Units. This is in contrast to OpenAI and Anthropic, which have to rent capacity from other clouds at a margin, on top of those clouds generally running more expensive Nvidia graphics processing units (GPUs).

If Alphabet has competitive AI algorithms, its current cost advantages should allow it to serve tokens to customers at a lower cost while also enabling it to provide more capacity amid insatiable demand. This could be what Berkshire sees.

An $80 billion raise could extend the advantage

Both Anthropic and OpenAI have been raising capital in private markets this year, and each has filed to go public, likely later in the year. AI token demand is booming, and each needs to buy computing resources to meet it.

But Alphabet pre-empting those IPOs by raising an additional $80 billion on top of its internal cash flow not only matches the upcoming raises for Anthropic and OpenAI but could also even extend its advantage by raising this amount first.

This is because memory and chips are currently in short supply, with large companies prepaying and committing to buy semiconductors and high-bandwidth memory over multiple years. If Alphabet can make larger commitments earlier, that could box out competitors or raise the price of compute for everyone else, including Anthropic and OpenAI, who have fewer financial resources.

At this critical juncture in the AI race, with the winners yet to be determined, this strategic move could make a big difference.

There were once many search engines, too

Back in the early days of the internet, before Google emerged, there were many search engines. However, Google emerged as the dominant, near-monopoly on this incredibly profitable business. It appears that Greg Abel thinks Alphabet still has the core competency to pull off a repeat with generative AI -- a market that could be multiples larger than Search is today.

American Express is an advertising partner of Motley Fool Money. Billy Duberstein and/or his clients have positions in Alphabet, Apple, and Berkshire Hathaway. The Motley Fool has positions in and recommends Alphabet, American Express, Apple, Berkshire Hathaway, and Nvidia. The Motley Fool has a disclosure policy.