Alphabet shares jump after Berkshire makes rare tech bet with US$4.9 billion stake

A sign is displayed on a Google building at their campus in Mountain View, Calif., on Sept. 24, 2019. (AP Photo/Jeff Chiu, File)

Alphabet’s shares rose 5.2 per cent on Monday after Berkshire Hathaway disclosed a stake in the tech giant, marking what could be one of the final major investments by the conglomerate under the leadership of Warren Buffett.

The stock purchase, a rare bet on technology by Berkshire, comes amid growing concerns over heavy AI spending as tech behemoths splurge hundreds of billions of dollars to build data centers and buy chips that power them.

A filing showed on Friday that Berkshire owned 17.85 million shares in Google’s parent as of September 30. The stake would be worth $4.93 billion as of the stock’s last close, according to Reuters’ calculations.

While Berkshire’s investment could be seen as an endorsement of the tech sector, questions over the sustainability of the spending spree have triggered market pullbacks in recent weeks.

Buffett, also known as “The Oracle of Omaha” for his investing success as well as his folksy wisdom, is ending his 60-year run as chief executive officer of Berkshire Hathaway at the end of 2025. He will be succeeded by Greg Abel.

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It was unclear whether Buffett, his portfolio managers Todd Combs and Ted Weschler or Abel made the Alphabet stock purchase, though Buffett typically oversees the larger investments.

At Berkshire’s annual shareholder meeting in 2019, Buffett and late Vice Chairman Charlie Munger lamented not investing in Google sooner.

“We screwed up,” Munger had said.

BERKSHIRE’S SELECTIVE BETS

The move will also give Berkshire a position in a tech heavyweight that is priced more modestly compared with its AI peers.

Alphabet trades at 25.01 times expected earnings over the next 12 months, versus 30.02 for Nvidia NVDA.O and 29.37 for Microsoft MSFT.O, according to data compiled by LSEG.

Berkshire also reduced its stake in Apple AAPL.O, but the iPhone maker remains its largest stock holding worth $64.9 billion after the cut. Buffett has long argued that Apple is a consumer-products company rather than a technology bet.

It trimmed its stake in Bank of America BAC.N as well, the latest move in a drawdown that began last year.

Berkshire has let its cash pile climb to a record, unsettling some investors who view the company as a bellwether for the U.S. economy and worry the hoard signals Buffett sees valuations as too high.

The Alphabet investment, however, suggests the company could be balancing caution with opportunism, deploying capital selectively in companies it views as resilient.

Alphabet’s shares have gained 46 per cent so far this year, handily outperforming the benchmark S&P 500 index .SPX.

Still, Berkshire’s equity portfolio remains heavily tilted towards financial services, which accounted for 36.6 per cent of the holdings as of September, according to Morningstar.

(Reporting by Niket Nishant in Bengaluru; Editing by Saumyadeb Chakrabarty)