Key takeaways
- Berkshire Hathaway, the conglomerate run by Warren Buffett, took a sizable stake in tech giant Alphabet during the third quarter.
- Alphabet shares have risen 70% since the beginning of the year, making them an unusual addition to Berkshire’s portfolio of value-oriented stocks.
- Most Wall Street analysts are bullish on Alphabet stock, with many raising their price targets after its better-than-expected earnings report last month.
Warren Buffett’s Berkshire Hathaway has made a big bet on one of the tech sector’s hottest stocks.
Berkshire (BRK.A)(BRK.B) bought 17.8 million Class A shares of Alphabet (GOOGL) in the third quarter, according to a regulatory filing made public earlier this month. A stake that size in Google’s parent company would be worth nearly $5.7 billion at Monday’s close.
Alphabet is an unusual buy for Berkshire, which tends to buy unloved stocks with the intention of holding them for the long term.
Meanwhile, Alphabet is far from unloved. Shares soared more than 6% on Monday after Salesforce CEO Marc Benioff praised its Gemini 3 AI model and said he would “never go back” to rival OpenAI’s ChatGPT. Later Monday, news reports—first published by The information—indicated that it might sell AI chips to Meta Platforms (META), further strengthening investors’ sense of the company’s position. Alphabet shares rose nearly 2% on Tuesday.
Why this news is important
Berkshire Hathaway is known for investing in companies with slow, steady businesses and, in the company’s view, undervalued stocks, making its purchase of Alphabet relatively unusual.
Not only is Alphabet a member of the Magnificent Seven, the set of high-flying tech stocks whose valuations have spooked investors lately, but it’s also by far the best-performing member of the group this year. Shares are up about 70%, more than double Nvidia’s (NVDA) performance so far this year as of Tuesday’s close.
Alphabet isn’t the only Mag 7 stock in Berkshire’s portfolio. Apple (AAPL) is the conglomerate’s largest shareholding, worth approximately $65.7. billion. But he first bought Apple shares in 2016 and has been paring that position over the past two years. Berkshire sold about 15% of its stake in the iPhone maker last quarter.
What Wall Street thinks of the alphabet
Analysts are generally bullish on Alphabet stock.
JPMorgan analysts raised their price target by 13% after the company reported better-than-expected third-quarter results late last month. Analysts called the report “solid across the board” and noted that Alphabet was showing “signs that AI search is more of an opportunity than a threat,” contrary to Wall Street expectations. Analysts at Wedbush also raised their price target, arguing that the quarter “validates Alphabet’s position as a major beneficiary of AI.”
Alphabet also raised its full-year capital spending guidance last month. It expects to invest more than $90 billion in capital equipment this year, with much of that amount going toward building data centers and filling them with chips to train and run artificial intelligence models. Investors have recently become cautious about spending on AI in technology, with some wondering when, if ever, they will see a return on their investments.
Regardless, 12 of the 15 analysts with current ratings tracked by Visible Alpha share a “buy,” with the rest recommending hold on the stock. Their average price target of $324 is right where the stock closed on Tuesday.
UPDATE: This article has been updated to include the latest stock price information.
