For months, Wall Street has been preoccupied with concerns that the surge in artificial intelligence might be a bubble on the verge of bursting, yet this apprehension didn't deter Berkshire Hathaway from acquiring stock in a leading AI hyperscaler.
TL;DR
- Berkshire Hathaway, led by Warren Buffett, bought 17.8 million shares of Alphabet, a major AI hyperscaler.
- This significant purchase occurred despite ongoing concerns about a potential AI bubble on Wall Street.
- The Alphabet stake, valued at approximately $4.3 billion, adds to Berkshire's holdings in Amazon.
- Alphabet's stock has seen a 46% year-to-date increase, reflecting its strong market performance.
Warren Buffett’s conglomerate revealed in a regulatory filing late Friday that it purchased 17.8 million shares of Google parent Alphabet during the third quarter. The stock jumped 4% in after-hours trading yesterday.
Last quarter's largest stock purchase, valued at approximately $4.3 billion by September's close, also saw Berkshire acquiring stakes in Chubb, Domino’s Pizza, Sirius XM, and Lennar.
Meanwhile, Berkshire maintained its position in Amazon, another AI hyperscaler, in the third quarter.
Alphabet's inclusion coincides with a significant market surge. Despite the recent AI-driven stock market downturn, Alphabet's stock has climbed 46% year-to-date.
Alphabet has indeed been on Berkshire's radar previously. Back in 2019, Charlie Munger, who was then Buffett's closest associate, confessed that he felt “like a horse’s ass for not identifying Google better. I think Warren feels the same way.”
At that time, Google's strong position in search captured Berkshire's attention. However, presently, the firm is counted among the major technology companies spearheading advancements in AI.
Alphabet, Amazon, Meta Platforms and Microsoft alone are spending hundreds of billions of dollars a year with no signs of a slowdown.
Through 2028, Morgan Stanley projects AI hyperscalers will invest approximately $3 trillion in data centers and related infrastructure.
Wall Street is concerned that the substantial capital spending, largely financed by debt, may hinder AI firms' ability to generate lasting revenue and profits from these investments.
As Buffett is expected to relinquish his role as Berkshire's CEO before the year concludes, it's uncertain if he, his successor Greg Abel, or another senior leader decided to acquire Alphabet shares.
Investors might not receive direct communication from the “Oracle of Omaha” regarding this issue. According to a letter released on Monday, Buffett said he’ll be “going quiet,” will cease authoring Berkshire’s yearly report and will also refrain from discussing “endlessly” during the annual gathering.
As Buffett's departure neared, Berkshire adopted a conservative approach to the stock market and company purchases, resulting in its cash reserves reaching unprecedented levels.
Buffett's closely watched stock holdings saw a general decline, with the last quarter representing three straight years of net selling. The latest divestments involved additional shares of Apple, a company Berkshire has been steadily offloading for over twelve months.