Former Berkshire Hathaway CEO Warren Buffett is famous for shying away from technology companies. While the conglomerate has bought stakes in tech companies on occasion, it generally sticks with less tech-focused companies. But in 2025, Berkshire dove into the artificial intelligence (AI) waters in earnest when it bought shares in a dominant internet enterprise in the third quarter of 2025.
While the decision to buy this top AI stock likely came from the Oracle of Omaha's investment team rather than Buffett himself, it's still a vote of confidence in the business.
Image source: Getty Images.
Alphabet apparently fits the criteria
Berkshire Hathaway now owns a $5.4 billion stake in Alphabet (GOOGL 1.66%) (GOOG 1.69%), making it the 14th-largest position in its massive public equities portfolio. Apple and Amazon are the only other two "Magnificent Seven" stocks Berkshire has a stake in.
Alphabet passes Berkshire's test when it comes to quality. The company has a wide economic moat that is supported by powerful network effects in Search and YouTube. There are also valuable intangible assets like brand and data, switching costs for customers of Google Cloud, and a major cost advantage due to its scale.
The business is in a very favorable financial position as well. Alphabet reported a 32% operating margin in 2025. It raked in $73 billion in free cash during the year. And it has a strong balance sheet that reduces financial risk.
During the third quarter of 2025, Alphabet shares traded at an average price-to-earnings ratio of 22.3. The valuation is perhaps another reason Berkshire decided to take a position at that time.
NASDAQ: GOOGL
Key Data Points
Alphabet is leading the AI charge
Investors are thirsty to add AI exposure to their portfolios. Alphabet is a compelling choice, especially since it essentially has Buffett's stamp of approval now.
The business is an AI superstar. Its Gemini app had 750 million monthly active users in the fourth quarter. Google Cloud is registering unbelievable demand, with revenue surging 48% in Q4.
"Nearly 75% of Google Cloud customers have used our vertically optimized AI, from chips, to models, to AI platforms, and enterprise AI agents, which offer superior performance, quality, security, and cost-efficiency," CEO Sundar Pichai said.
AI permeates the organization, improving the experience for users of Alphabet's popular apps. The advantage for this company is that it can iterate quickly and ship new AI features to almost instant adoption.
Higher engagement can support more ad revenue. Alphabet is leveraging AI to support targeting capabilities and creative efforts for its ad customers. Given that ads represent 72% of sales, this is a critical area to focus on.
Alphabet is sparing no expense. Its capital expenditures are projected to total $180 billion (at the midpoint) in 2026 as it looks to expand its AI-related infrastructure to continue innovating and to handle strong demand.
Right now, shares aren't that expensive. Investors can scoop up Alphabet at a P/E multiple of 27.8. Alphabet should perform well over the long run.
