Berkshire Hathaway Invests in Alphabet Amid AI Bubble Concerns

Concerns over the artificial intelligence (AI) market have increased on Wall Street. However, Berkshire Hathaway has made bold investments amid this uncertainty. The investment giant, led by Warren Buffett, disclosed a significant acquisition late last week.

Berkshire Hathaway’s Major Investment in Alphabet

During the third quarter, Berkshire Hathaway purchased 17.8 million shares of Alphabet, Google’s parent company. This investment was valued at approximately $4.3 billion by the end of September. The move marks Berkshire’s largest stock addition of the quarter, resulting in a 4% rise in Alphabet shares during after-hours trading.

Broader Investment Strategy

• Berkshire also acquired shares of Chubb, Domino’s Pizza, Sirius XM, and Lennar.
• It maintained its investment in Amazon, another major player in the AI sector.

Alphabet’s shares have performed remarkably well, rising 46% year-to-date despite recent market fluctuations caused by AI-related concerns. Historically, Berkshire has taken a keen interest in Alphabet, as noted by Charlie Munger’s previous admissions regarding the company’s dominance in search engines.

AI Investment Landscape

Alphabet, along with other tech giants such as Amazon, Meta Platforms, and Microsoft, is investing heavily in AI technologies. Collectively, these companies are projected to spend around $3 trillion on necessary infrastructure by 2028, according to Morgan Stanley. This hefty investment raises questions about the sustainability of revenue generation in the AI sector, as concerns mount over whether companies can convert their expenditures into meaningful profit.

Buffett’s Future and Berkshire’s Strategy

As Warren Buffett prepares to step down as CEO of Berkshire Hathaway by the end of the year, the decision to invest in Alphabet raises curiosity about the strategic direction of the company. It remains unclear if Buffett or his chosen successor, Greg Abel, made the investment decision. In a recent letter, Buffett announced that he would limit his communications, which may affect future investor insights.

Leading up to his departure, Berkshire has adopted a cautious approach to market investments, contributing to a substantial cash reserve. Over the last three years, Buffett’s portfolio has experienced net selling, including a reduction in Apple shares, which have been consistently offloaded.