On 1 June, United States technology giant Alphabet announced that it is raising $80 billion equity capital to funds its ambitious artificial intelligence (AI) plans. And a chunk of this — $10 billion — comes from the Greg Abel-led Berkshire Hathaway.
Abel was announced as successor to the CEO role after beloved billionaire investor and long-time Berkshire CEO Warren Buffett‘s stepped away from the helm. However, some doubted whether 64-year-old Abel could match the fervent investor confidence evoked by the 96-year-old, dubbed the “Oracle of Omaha”.
There was speculation if Berkshire could sustain its “Buffett premium” without the ace investor leading decisions. Now, Greg Abel‘s first big choices are making noise.
Berkshire adds $10 billion to Alphabet stake
Reports in June said Berkshire will buy $10 billion of stock in Google‘s parent company Alphabet, signalling confidence in the company’s AI plans. As of 31 March, the company held $16.6 billion of Alphabet shares — making it among its top five stock holdings and second biggest tech bet after Apple (for long Buffett’s favoured stock but which he considered a “consumer” stock).
Notably, Buffett and late business partner Charlie Munger had at the 2019 annual general meeting with shareholders expressed regret over missing out on Google, with the latter saying: “We screwed up”, according to a Reuters report.
But a Bloomberg opinion piece still felt that Abel has moved away from Buffett’s investment philosophy. The publication noted that while Alphabet has “wonderful” gross margins (exceeding 50%) and ROE that improves (above 35% in 2025), the stock also costs 25x its next year’s earnings — “more expensive than Buffett likes” to bet on untested tech.
What makes Greg Abel optimistic about Alphabet?
According to an analysis by the Motley Fool, Abel’s bullishness on Google has so far paid off — Alphabet stock has doubled over the last year since it bought nearly $17 billion worth stake in Q3FY25, and the CEO plans to hold the stock for long.
It noted that Alphabet leads various segments thanks to Google (search, videos through YouTube and digital advertising) and its Cloud division has made its way into the Big 3 in that space. It also has presence in all major markets with plenty of opportunity for growth worldwide.
Following Buffett’s philosophy of investing in companies with economic moats, scope for competitive edge and with plans to hold on for the long term to even out volatility — Alphabet can be deemed a “forever stock”, it added.
For now, it seems experts are divided. At this time, Buffett is still Chairman at Berkshire having left his successor a $400 billion cash pile to play with (Abel also invested $6.8 billion through cash acquisition of home builder Taylor Morrison Home Corp last month — adding a dozen other housing-related businesses to portfolio). We will have to wait and watch for how the AI game plays out to find out if Abel’s play on Google can stand tall among Buffett’s own (Apple).
(With inputs from Agencies)
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