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✅ Main takeaway:
Key takeaways
- Berkshire Hathaway Group, run by Warren Buffett, acquired a significant stake in technology giant Alphabet during the third quarter.
- Alphabet stock is up 70% since the beginning of the year, making it an unusual addition to Berkshire’s value-oriented stock portfolio.
- The majority of Wall Street analysts are optimistic about Alphabet stock, with many raising their price targets following its better-than-expected earnings report last month.
Warren Buffett’s Berkshire Hathaway has made a big bet on one of the hottest technology stocks.
Berkshire (BRK.A) (BRK.B) bought 17.8 million shares of Alphabet’s Class A stock (GOOGL) in the third quarter, according to a regulatory filing published earlier this month. A stake of that size in Google’s parent company is worth about $5.7 billion as of Monday’s close.
Alphabet is an unusual buy for Berkshire, which tends to buy out-of-favor stocks with the goal of holding them for the long term.
The alphabet, meanwhile, is far from unpopular. The stock rose more than 6% on Monday after Salesforce CEO Marc Benioff praised the Gemini 3 AI model, saying he would “never go back” to using OpenAI’s rival ChatGPT. Later on Monday, news reports were first published by Information– indicated that it may sell AI chips to Meta Platforms (META), boosting investors’ sense of the company’s standing. Alphabet shares rose nearly 2% on Tuesday.
Why is this news important?
Berkshire Hathaway is known for investing in companies with slow, steady businesses and, in the company’s opinion, undervalued stocks, which makes buying Alphabet relatively unusual.
Not only is Alphabet a member of the Magnificent Seven, the group of high-flying technology stocks whose valuations have recently spooked investors, it is also the group’s best-performing member this year. Shares are up nearly 70%, more than double Nvidia’s ( NVDA ) year-to-date revenue through Tuesday’s close.
Alphabet isn’t the only Mag 7 stock in Berkshire’s portfolio. Apple (AAPL) is the largest stock of the group, worth about $65.7 one billion. But it first bought Apple shares in 2016 and has been reducing that position over the past two years. Berkshire sold about 15% of its stake in the iPhone maker last quarter.
What does Wall Street think about the alphabet?
Analysts are generally optimistic about Alphabet shares.
JPMorgan analysts raised their price target by 13% after the company reported better-than-expected third-quarter results late last month. Analysts described the report as “strong across the board” and noted that Alphabet is showing “signs that research into artificial intelligence represents more of an opportunity than a threat,” contrary to Wall Street expectations. Analysts at Wedbush also raised their price targets, saying the quarter “underscores Alphabet’s position as a major beneficiary of AI.”
Alphabet also raised its full-year capital expenditure guidance last month. It expects to invest more than $90 billion in capital equipment this year, with a large portion of that going toward building data centers and filling them with chips to train and run artificial intelligence models. Investors have recently become concerned about AI spending in the technology space, with some wondering when, if ever, they will see a return on their investment.
Regardless, 12 out of 15 analysts have current tracking ratings on Visible Alpha stock with a “buy” rating, and the rest recommend holding the stock. The average price target of $324 is right around where the stock will close on Tuesday.
Update: This article has been updated to include the latest stock quote information.
⚡ What do you think?
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