Berkshire Hathaway Has 10% of Its $358 Billion Portfolio Invested in 1 AI Hyperscaler Whose Stock Is Up 70% in 1 Year
Key Points
In the second quarter, Alphabet became Berkshire Hathaway’s third-biggest holding.
New CEO Greg Abel must believe that the AI hyperscaler’s colossal capital expenditures will pay off.
The "Magnificent Seven" stock’s price-to-earnings ratio has come down over the last 12 months.
- 10 stocks we like better than Alphabet ›
Berkshire Hathaway's (NYSE: BRKA) (NYSE: BRKB) most recent 13F was just filed with the Securities and Exchange Commission, and the company made a notable move. During the second quarter, it increased the size of its bet on Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), thanks to the $10 billion private placement in June and open market transactions.
Oracle of Omaha Warren Buffett, who is now chairman of Berkshire after retiring as CEO at the end of 2025, revealed that he initiated this position last year. Combined, the Class A and Class C shares make up the conglomerate's third-largest position, valued at $36.6 billion. It's now larger than the Coca-Cola stake.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
Berkshire and Buffett have made it crystal clear just how bullish they have become on Alphabet, whose share price has surged 70% over the past 12 months. Alphabet is one of the major hyperscalers in artificial intelligence (AI).
Image source: The Motley Fool.
Alphabet passes the test
Notably, Buffett led the decision to buy Alphabet during the third quarter last year, although he did discuss the move with now-CEO Greg Abel. Buffett's philosophy has seen him shy away from internet enterprises in the past. This is no longer the case, of course. It's even more interesting that the Alphabet position was started during the ongoing AI revolution.
Berkshire must be optimistic about Alphabet's prospects over the coming five years and beyond. This is easy to believe, given that the business possesses a wide economic moat. There are network effects at play for Google Search and YouTube. Google Cloud has a notable scale advantage, and its customers face switching costs. And valuable intangible assets, such as the Google brand name and the company's ability to collect and leverage data, bolster its competitive position.
Abel must also favor Alphabet's position in the ongoing AI data center boom. Investors are already familiar with Alphabet's capital expenditure (capex) surge, as it now plans to spend $200 billion (at the midpoint) in 2026, with a higher outlay next year. The hyperscalers are sparing no expense to build AI infrastructure.
Rising capex has officially resulted in negative free cash flow (FCF), to the tune of a $5.9 billion loss in the second quarter. It might not be long until sell-side analysts update their spreadsheets to forecast that Alphabet will post negative FCF for the full year.
Alphabet is a wildly profitable company on the income statement, despite the massive hit to its FCF. Its operating margin over the first six months of 2026 was a superb 35%. And its balance sheet has $242 billion in cash, cash equivalents, and marketable securities.
Buffett wouldn't have made a sizable capital outlay if he didn't appreciate Alphabet's financial position. This tells me that Berkshire's investment team believes it can accurately predict Alphabet's FCF well into the future. Buffett and Abel must have concluded that the multi-hundred-billion-dollar capex plan will generate a satisfactory return on invested capital.
This AI stock has gotten cheaper
Over the past year, Alphabet shares have soared 70%. After a fantastic gain like that, investors are forgiven for assuming the stock is expensive now. This isn't the case, though. You'd be surprised to learn that the valuation has become cheaper. The AI stock trades at a price-to-earnings (P/E) ratio of 17.4 today. This multiple has declined by 20% in the last 12 months.
One of Warren Buffett's core investing guidelines is never to overpay for any company. Buying at an attractive valuation is preferred. Alphabet shares are at a P/E ratio that's 34% below the S&P 500's multiple.
Berkshire Hathaway will file its next 13F in about three months. When this happens, the world might find out that it further added to its Alphabet stake in the current quarter. The conglomerate certainly has enough cash on hand to do so.
Should you buy stock in Alphabet right now?
Before you buy stock in Alphabet, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Alphabet wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $419,408!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,348,694!*
Now, it’s worth noting Stock Advisor’s total average return is 966% — a market-crushing outperformance compared to 213% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of August 19, 2026.
Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Berkshire Hathaway. The Motley Fool has a disclosure policy.
Recommended Articles
