Alphabet Stock Has Surged Since Warren Buffett's Berkshire Hathaway Bought a Stake in the Tech Giant. Is It Too Late to Buy?

Alphabet shares jumped to near-record highs after Berkshire Hathaway disclosed a multibillion-dollar stake, underscoring investor endorsement of the company’s AI-driven strategy even as the stock is up more than 50% YTD and trades at a still-modest ~28x P/E. Strong third-quarter results — revenue $102.3 billion (+16% y/y), Google Services $87.1 billion (+14%), Google Cloud $15.2 billion (+34%), net income $35 billion (+33%), EPS $2.87 (+35%) — plus Q3 free cash flow of $24.5 billion, TTM FCF $73.6 billion and $98.5 billion in cash and marketable securities highlight robust cash generation. Management has raised 2025 capital spending to $91–93 billion to build AI-focused infrastructure, a move that supports growth but creates execution and margin risk if demand slows, so Alphabet looks attractive for investors comfortable with heavy near-term investment for longer-term AI payoff.

Analysis

Berkshire Hathaway revealed a multibillion-dollar position in Alphabet (about 17.9 million shares as of Sept. 30, roughly $5 billion at current prices), a disclosure that accelerated a >50% year-to-date rally with shares trading near record highs. Investors can no longer buy at Berkshire's average Q3 price, but the stake signals an endorsement of Alphabet’s AI-driven strategy during an aggressive capital cycle.

Alphabet reported robust third-quarter operational results: revenue $102.3 billion (+16% y/y), Google Services $87.1 billion (+14%), Google Cloud $15.2 billion (+34%), net income ~$35 billion (+33%), and EPS $2.87 (+35%); Q3 free cash flow was $24.5 billion with trailing-12-month FCF of $73.6 billion and $98.5 billion in cash and marketable securities. The shares trade at about 28x P/E despite the YTD surge, supporting the view that valuation remains reasonable relative to growth.

Management raised 2025 capital expenditures to $91–$93 billion (up from ~$85 billion), prioritizing AI-focused data centers and custom chips—an investment posture that fuels growth but increases execution and margin risk through higher depreciation and dependence on sustained AI infrastructure demand. Berkshire’s purchase reinforces Alphabet’s fit for long-term, cash-generative, competitively advantaged portfolios, but the size and timing of capex create a clear near-term risk if demand or competitive dynamics deteriorate.

Key Decisions for Investors

• Consider initiating or adding to a conviction-sized position if you are comfortable with heavy near-term AI capex given 28x P/E, strong Q3 growth, and substantial cash generation, but avoid size exposure equivalent to Berkshire’s undisclosed average cost
• Monitor Google Cloud revenue growth, quarterly free cash flow, margin trends and any management commentary on AI infrastructure demand or competitive pressure as leading indicators that could validate or reverse the current thesis given the $91–93 billion capex plan
• If risk tolerance is lower, use protective hedges or staggered buy-limits to manage downside from execution or depreciation risk, or wait for a pullback to re-evaluate relative to updated guidance