Warren Buffett's Successor, Greg Abel, Keeps Buying This Incredible Artificial Intelligence (AI) Stock That Buffett Also Loved

Berkshire Hathaway’s Greg Abel added about 48 million shares of Alphabet in Q2 (~$16.3B), making Alphabet its third-largest holding—an explicit vote of confidence post-close. The article highlights Alphabet’s Q2 performance with overall revenue up 24% YoY and Google Cloud revenue up 82% YoY to $24.8B, generating $8.8B operating income, supported by Alphabet’s AI data-center buildout. Valuation is described as reasonable at ~23x forward earnings, implying room for continued rapid growth as AI capacity ramps.

Analysis

Berkshire’s incremental buying matters less as a “Buffett endorsement” than as a signal that Alphabet’s AI capex is starting to look monetizable rather than merely defensive. If external cloud demand is absorbing more of the buildout, the market should reward GOOG/GOOGL on a higher quality-of-earnings multiple: faster revenue plus better capex efficiency can justify a premium even before ad growth reaccelerates.

Second-order winners extend beyond Alphabet. The AI infrastructure trade likely keeps flowing into semis, networking, power, and data-center equipment, but the more interesting read-through is competitive pressure on AWS and Azure if Google Cloud is converting compute scarcity into share gains. That said, the near-term loser may be operating leverage at the hyperscalers: a capex arms race can boost revenue growth while compressing free-cash-flow conversion and keeping valuation debates alive.

The main risk is that the market confuses a strong quarter with a durable inflection. Over the next 1-3 months, the stock is probably driven by cloud growth and capex commentary; over 6-18 months, the key falsifier is any sign that incremental AI spend is not earning an acceptable return on invested capital. If cloud growth decelerates sharply or capex rises faster than revenue, the “cheap at ~23x forward” argument breaks quickly.

Contrarian view: the consensus may be underestimating how much of Alphabet’s AI story is already financed by its own cash engine, which reduces balance-sheet risk versus pure-play AI names. But it may also be overpaying for Berkshire’s signal alone; a few more quarters of cloud margin discipline are required before this becomes a structural rerating rather than a sentiment trade.

Key Decisions for Investors

• Long GOOG/GOOGL on pullbacks over the next 2-4 weeks; target a 6-12 month hold if cloud revenue stays above the market’s implied growth path. Falsifier: cloud growth decelerates materially or capex intensity rises without operating leverage.
• Pair trade: long GOOG vs short AMZN for a 1-3 month relative-value position if you want cleaner AI cloud monetization exposure. Risk/reward improves if GCP keeps taking incremental AI workloads while AWS margin optics deteriorate.
• Use a call spread in GOOG into the next earnings cycle only on weakness, not strength. This is a momentum-with-fundamentals setup, so upside is best captured after post-event volatility rather than before it.
• Buy semicap / data-center infrastructure proxies on Alphabet strength only as a basket, not a single-name bet; the spend wave benefits the supply chain, but not all vendors will monetize equally. Watch for evidence that hyperscaler capex is broadening beyond one-off AI buildouts.
• No direct trade in BRK.B from this note; the signal is better viewed as confirmation of quality rather than a catalyst for the conglomerate itself. Revisit only if Berkshire’s positioning shifts again in the next 13F cycle.