Berkshire Hathaway has made a big move into technology by revealing a multibillion-dollar stake in Alphabet, the parent company of Google. This comes over 20 years after Google’s founders, Larry Page and Sergey Brin, acknowledged Warren Buffett’s influence during their 2004 IPO.
In their IPO letter titled “‘An owner’s manual’ for Google’s shareholders,” Page and Brin credited Buffett’s investment philosophy, stating, “Much of this was inspired by Warren Buffett’s essays in his annual reports and his ‘An Owner’s Manual’ to Berkshire Hathaway shareholders.” This set the tone for Google’s long-term focus.
Now, Berkshire Hathaway holds around $4.3 billion in Alphabet shares, making it the firm’s tenth largest equity investment. This represents one of Buffett’s rare large bets in technology, following Apple, Berkshire’s largest holding. The announcement saw Alphabet’s shares rise by about 3%.
Historically cautious with tech stocks, Berkshire’s investment signals recognition of Alphabet’s leadership in cloud computing and artificial intelligence. Alphabet recently posted its first quarter surpassing $100 billion in revenue, driven mainly by growth in its cloud division, which has a $155 billion backlog and cutting-edge AI chips.
Buffett, preparing to step down as CEO later this year, previously expressed regret for missing out on Google shares despite Berkshire’s insurance unit Geico spending heavily on Google ads. Berkshire also invested in Amazon in 2019, which has grown to a $2.2 billion holding.
Alphabet’s shares have surged roughly 50% this year, near all-time highs, yet remain modestly valued compared to peers like Microsoft and Nvidia, trading at about 26 times next year’s earnings.
Page and Brin rank seventh and eighth on the Forbes billionaire list, just behind Buffett at sixth. They cited Buffett repeatedly in their IPO filing, quoting, “We won’t ‘smooth’ quarterly or annual results: If earnings figures are lumpy when they reach headquarters, they will be lumpy when they reach you.”
Their dual-class share structure, granting them outsized control, follows the example of Berkshire and media companies like The New York Times, allowing focus on long-term goals despite quarterly fluctuations.