Berkshire Hathaway Has a New Top Holding, and It Dominates Its Market

Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB) has not had many changes to its top five holdings. Apple, Bank of America, American Express, Coca-Cola, and Chevron have pretty much been locked in the top five spots over the past four years.

But last quarter, a new stock crashed the party as Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) moved into the top five, displacing Chevron.

CEO Greg Abel and his team made a massive investment in the "Magnificent Seven" technology giant last quarter. They added 24.5 million shares of Alphabet in Q2, according to the Berkshire Hathaway 13F filing, increasing its stake by 45%.

Berkshire now holds about 79 million shares of Alphabet, the parent of Google, worth about $28.2 billion. That accounts for about 9.41% of the total portfolio, making it the fourth-largest holding. Only Apple (22%), American Express (17%), and Coca-Cola (11%) are larger.

Image source: Getty Images.

Capex concerns

Berkshire Hathaway didn't even own a single share of Alphabet stock until then-CEO Warren Buffett added almost 18 million shares for a $4.4 billion stake just one year ago, in the third quarter of 2025. Berkshire added another 36 million in Q1 and 24.5 million in Q2.

Over the past year, Alphabet stock has returned about 37%; however, shares have tumbled recently, down about 7% over the past month. Alphabet had a strong second quarter with revenue up 24% year over year to $120 billion and operating income up 30% to about $41 billion.

Investors are concerned about artificial intelligence (AI) spending and cash flow depletion. Alphabet is investing heavily in AI infrastructure for its cloud business to meet rising demand. In Q2, Alphabet raised its guidance for capital expenditures (capex) this year to $195 billion to $205 billion, up from the previous range of $180 billion to $190 billion.

The increase is mainly to accelerate capacity expansion to meet growing demand. But the spending has depleted Alphabet's free cash flow. It reported a cash outflow of $5.8 billion in the quarter, marking the first quarter since the company went public with negative free cash flow.

"We expect the free cash flow will remain under pressure driven by our investments in technical infrastructure, which enables us to capitalize on the AI opportunity and continue to drive attractive returns," CFO Anat Ashkenazi said on the earnings call.

The Amazon parallel

Amazon found itself in a similar place at the beginning of the year, and the market reacted similarly. But Amazon argued that it had to bite the bullet and spend the money to build the capacity to meet future demand.

In its most recent earnings report, Amazon showed that its investments are already paying off, as the stock soared post-earnings on improved cloud revenue.

The recent sell-off has put Alphabet stock at an extremely low valuation, trading at just 16 times earnings, which is right up Berkshire's alley as a firm that looks for good stocks at reasonable valuations.

That would describe Alphabet, the dominant market leader in internet search and one of the top cloud computing stocks.

American Express is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Dave Kovaleski has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, American Express, Apple, Berkshire Hathaway, and Chevron. The Motley Fool has a disclosure policy.