Google's parent company, Alphabet Inc. (GOOGL), is having a moment. And it's not just because of some new AI gadget or a earnings beat. No, this time it's a vote of confidence from one of the most respected names in investing: Berkshire Hathaway.
On Wednesday, Berkshire's CEO, Greg Abel, went on CNBC and did something you don't see every day. He talked up Alphabet's artificial intelligence credentials, and in the process, revealed that Berkshire has been quietly (well, not so quietly) loading up on the stock. The conglomerate's stake in Alphabet now stands at a cool $36.6 billion, making it the third-largest holding in Berkshire's equity portfolio.
This is a big deal for a few reasons. First, it's Abel's first major public statement about a key investment since taking the reins from Warren Buffett. Second, it signals that Berkshire, a company known for its cautious, value-oriented approach, sees real potential in the AI boom. And third, it comes at a time when investors are wrestling with a big question: is all that money Alphabet is pouring into AI infrastructure actually going to pay off?
Why Berkshire Believes in Google's AI
Abel's reasoning isn't just some abstract faith in technology. It's grounded in what Berkshire sees happening inside its own sprawling empire of companies. From insurance to railroads to utilities, Berkshire's businesses are using AI in real ways, and Abel says the results have been eye-opening.
"We have a lot of visibility from within our companies as to how we're using AI, what type of benefits it's delivering, so that brought incremental interest, and then we saw Google as a significant player," Abel told CNBC.
That's a pretty powerful endorsement. When the head of Berkshire Hathaway says he's seen AI's impact firsthand and it made him want to buy more Google stock, people tend to listen.
Berkshire's initial foray into Alphabet came about 15 months ago, with a $10 billion investment at a 6.5% discount. Abel noted that he and Buffett discussed both the size of the investment and the discount before pulling the trigger. Now, with the additional $17 billion added in the second quarter, Berkshire's total position is substantial.
The Numbers Behind the Bet
Let's put this in perspective. Berkshire now owns about 106 million Alphabet Class A and Class C shares, valued at roughly $36.6 billion. That made Alphabet Berkshire's largest portfolio addition during the quarter. It's a clear signal that the Omaha-based conglomerate sees Google as a core holding for the long haul.
Alphabet, of course, is one of the big tech companies spending heavily to expand computing capacity for AI workloads. That spending has investors split. Some see it as a necessary investment to stay ahead in the AI race. Others worry about the impact on margins and whether the returns will materialize.
Abel's comments suggest Berkshire falls firmly in the first camp. The conglomerate's confidence in Alphabet's AI position is growing, and it's putting its money where its mouth is.
What Analysts Are Saying
Wall Street, for the most part, is on board with Alphabet. The stock carries a consensus Buy rating, with an average price forecast of $429.15. That's a significant upside from current levels.
Recent analyst actions have been a mixed bag, though. Rosenblatt maintained a Buy rating with a $410 price forecast on Aug. 20. UBS, on the other hand, kept a Neutral rating but cut its price forecast to $379 on July 23. Morgan Stanley maintained an Overweight rating but lowered its price target to $400, also on July 23.
So, the sentiment is generally positive, but there's some caution creeping in, likely due to valuation concerns and the massive capital expenditure required for AI.
The ETF Effect
One thing to keep an eye on is Alphabet's heavy weighting in several growth-focused ETFs. For instance, it makes up 9.22% of the Franklin Focused Dynamic Growth ETF (FFOG), 9.91% of the CastleArk Large Growth ETF (CARK), and 9.83% of the Hartford Large Cap Growth ETF (HFGO).
Why does this matter? Because when money flows into or out of these funds, the fund managers have to buy or sell Alphabet shares to maintain their target weightings. So, any significant ETF inflows or outflows could create automatic buying or selling pressure on the stock, regardless of what's happening with the company's fundamentals.
A Look at the Charts
Technically, Alphabet is in a bit of a consolidation phase. The stock is trading below its 20-day, 50-day, and 100-day simple moving averages. Specifically, it's 2.9% below its 20-day average of $346.43, 3.6% below its 50-day average of $348.91, and 6.2% below its 100-day average of $358.45.
However, shares remain 0.4% above the 200-day average of $335.05. That's a key level, and holding above it keeps the longer-term uptrend intact.
The fact that the 20-day average is below the 50-day average suggests weaker short-term momentum. But the 50-day average is still above the 200-day average, which means the broader technical structure remains constructive. In other words, the stock is taking a breather, but it's not broken.
The MACD is below its signal line, and the histogram is negative, indicating that buying pressure has faded for now. This all points to a period of consolidation rather than a fresh breakout.
Alphabet shares have gained 58.51% over the past 12 months, which is a solid return. But the recent price action suggests the stock might be catching its breath before its next move.
Key levels to watch: Resistance is near $375.50. A move above that could reignite the bullish case. On the downside, support sits near $315. A break below the 200-day average could put that level in focus.
Price Action
As of premarket trading on Wednesday, Alphabet shares were up 0.31% at $333.07, according to market data.
So, what's the takeaway? Berkshire's increased stake and Abel's public endorsement are strong signals that one of the world's most successful investors sees real value in Alphabet's AI strategy. While the stock is in a short-term consolidation, the long-term picture remains positive. For retail investors, it might be worth paying attention to what Berkshire is doing. After all, they've got a pretty good track record.
