Key Takeaways
- Alphabet stock rose on Monday after Berkshire Hathaway, the conglomerate run by Warren Buffett, revealed it took a stake worth nearly $5 billion in the Google parent last quarter.
- Alphabet stock is up about 50% since the start of the year, making it an unusual purchase for value-focused Berkshire.
- The majority of Wall Street analysts are optimistic about Alphabet’s stock, with many raising their price targets after its better-than-expected earnings report last month.
Warren Buffett’s Berkshire Hathaway is making a big bet on one of the hottest tech stocks.
Berkshire (BRK.A)(BRK.B) purchased 17.8 million shares of Alphabet’s Class A stock (GOOGL) in the third quarter, according to a regulatory filing made public on Friday evening. A stake of that size in the Google parent would be worth nearly $5 billion as of Monday’s close.
Shares of Alphabet jumped on Monday, as is often the case when Berkshire makes a multibillion-dollar investment. Alphabet stock rose more than 3%, while the majority of its big tech peers declined.
Why This News Is Significant
Berkshire Hathaway is known for investing in companies with slow-and-steady businesses and, in the firm’s opinion, undervalued stocks, making its Alphabet purchase a relatively unusual one.
Berkshire’s Rare Tech Bet
Alphabet is an unusual purchase for Berkshire, which tends to buy unloved stocks with the intention of holding them long term.
Alphabet, meanwhile, is far from unloved. It’s a member of the Magnificent Seven, the high-flying tech stocks whose valuations have spooked investors of late. Alphabet stock is up 50% since the start of the year. All of those gains came after mid-July, when the stock finally recovered from the broad market downturn that was fueled by concerns about tariffs.
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Alphabet isn’t the only Mag 7 stock in Berkshire’s portfolio. Apple (AAPL) is the conglomerate’s largest stock holding, worth about $65 billion. But it first bought Apple stock in 2016 and has been trimming that position for the past two years. Berkshire sold about 15% of its stake in the iPhone maker last quarter.
What Wall Street Thinks of 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. The analysts called the report “strong across the board,” and noted Alphabet was showing “signs that AI search is more opportunity than threat,” contrary to Wall Street’s expectations. Analysts at Wedbush also raised their price target, and argued the quarter “validates Alphabet’s position as a leading AI beneficiary.”
Alphabet also raised its full-year capital expenditures guidance last month. It expects to invest more than $90 billion in capital equipment this year, with much of that going toward building data centers and filling them with chips to train and run AI models. Investors have recently grown wary of tech’s AI spending, with some wondering when they’ll see a return on their investments, if at all.
Regardless, 11 of the 14 analysts with current ratings tracked by Visible Alpha rate shares a “buy,” and the remainder recommend holding the stock. Their average price target of $324 is about 14% above the stock’s closing price on Monday.
CORRECT: This article has been updated to correct the spelling of Berkshire Hathaway.