When you think of the stocks that Berkshire Hathaway (BRK.A 0.24%) (BRK.B 0.38%) and its legendary CEO, Warren Buffett, invest in, it's usually stalwart companies like Coca-Cola, insurance businesses, and railroads that come to mind. One of its most famous investments is Apple, which it bought as a value investment and is a fairly simple operation to understand.
Berkshire isn't known to invest in cutting-edge technologies and prefers proven businesses with strong cash flows. So hearing that Berkshire invested in a company with quantum computing aspirations is surprising. But when you dig into this recent investment, it's clear that it fits the Berkshire mold nicely.
So, what is this new quantum computing investment Berkshire just made? It's none other than Alphabet (GOOG 0.58%) (GOOGL 0.42%).
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Alphabet's quantum computing efforts are impressive
During Q3, Berkshire Hathaway took a position in Alphabet. We don't know for sure if Buffett was the one who made the purchase, as it could have been Ted Weschler and Todd Combs, who are known to make more tech-centric investments.
Furthermore, Buffett is on his way out as CEO and is stepping down at the end of the year. So it's possible that Buffett had nothing to do with the purchase, but he has long been a fan of Alphabet.
Buffett previously said that he "blew it" by not investing in Alphabet (owner of the Google Search engine) earlier when he noted that Geico, one of Buffett's legendary insurance investments, was paying them each time a Google Search directed traffic to Geico's website. Investors shouldn't be surprised that Berkshire eventually came around to owning Alphabet, but what about its quantum computing endeavors?
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Key Data Points
Buffett and Berkshire have long advocated for businesses that are fairly simple and can be easily understood. Quantum computing is certainly not that. However, it's unlikely that Berkshire purchased shares of Alphabet because of its quantum computing investments, even though they are impressive.
Google's Willow quantum computing chip recently ran the first verifiable quantum computing algorithm -- 13,000 times faster than the world's fastest supercomputer. That's an incredible improvement, but it's not so fast that the results from the quantum computer couldn't be verified by classical computing technology.
Alphabet has more resources than nearly any competitor in the quantum computing arms race could dream of, making it a top contender in this realm. If Google's quantum computing technology becomes the ultimate winner in the space, it could be a nice boost to the base business, which is the real reason why Berkshire invested in Alphabet.
Alphabet checks a lot of Berkshire investment boxes
Alphabet's base advertising business is still growing despite its maturity. Google search revenue was up 15% in the third quarter, and is likely being boosted by its integration of generative AI and traditional search. A strong base business with massive cash flows is something that Berkshire looks for, and it likely isn't concerned with Alphabet's other bets like quantum computing and self-driving cars.
Berkshire and Buffett have primarily followed a value investing philosophy over the past 50 years. With Berkshire scooping up Alphabet's stock for about $200 per share, they likely purchased Alphabet's stock for about 19 times forward earnings.
Alphabet's stock has risen quite a bit since then, but I still think that it's a solid stock to buy right now. It has a ton of momentum in the artificial intelligence (AI) and cloud computing space, which will boost growth rates alongside its strong advertising business. With long-shot investments such as quantum computing also being made, it has several potential winners growing under its umbrella.
Whether it was Buffett who made the Alphabet purchase or not for Berkshire doesn't matter; Alphabet checks a lot of the boxes that Berkshire looks for in an investment, and I think it's primed for even more upside in 2026 and beyond.
