Greg Abel triples Berkshire's Alphabet stake to 6% of portfolio

Berkshire Hathaway CEO Greg Abel tripled the conglomerate's Alphabet stake to 6% of its $263 billion US equity portfolio in the second quarter.

"It's clear that our AI investments and full-stack approach are driving performance across our business," Alphabet CEO Sundar Pichai said on the earnings call.

Alphabet reported Q2 revenue of $119.8 billion, up 24% from a year earlier and marking its sixth straight acceleration. Google Cloud revenue surged 82% to $24.8 billion, with operating margin expanding to 35.6% from 20.7%. Operating income rose 31% to $40.8 billion. But the company raised its full-year 2026 capital expenditure forecast to as much as $205 billion, up from a prior $190 billion ceiling, sending free cash flow to negative $5.9 billion versus positive $10.4 billion a year ago.

Alphabet shares fell 7% on the capex news, wiping out gains from what was otherwise a record revenue quarter. The stock now trades at 16 times forward earnings, below its five-year average, as investors weigh whether AI infrastructure spending will generate sufficient returns.

Berkshire's initial Alphabet position represented 2% of its US stock portfolio. Abel, who succeeded Warren Buffett as CEO earlier this year, tripled that stake during the second quarter, making Alphabet the conglomerate's second-largest equity holding after Apple, according to the company's latest 13F filing.

The timing is notable. Berkshire accumulated shares during a period when Alphabet's stock was under pressure from the market's focus on capital spending rather than revenue growth. Alphabet's Q2 capex reached a record $44.9 billion, more than double the year-ago figure, with roughly 60% directed at AI servers and the remainder funding data center construction.

Google Cloud's contracted revenue backlog has grown to $514 billion, and the Gemini app has 950 million monthly active users — data points that support the bull case that AI demand is real and monetizable. The bear case centers on whether a 42% capex-to-revenue ratio — more typical of a utility than a software company — can sustain investor confidence.

The four largest hyperscalers — Alphabet, Amazon, Microsoft, and Meta — are projected to spend a combined $725 billion on capital expenditures in 2026, up roughly 77% from 2025, according to industry estimates.

For Berkshire holders, Abel's bet signals conviction that Alphabet's AI investments will compound over time. The next catalyst is the Federal Reserve's July 28-29 meeting, where rate decisions could affect the discount rate applied to the future earnings that justify Alphabet's infrastructure buildout.

This article is for informational purposes only and does not constitute investment advice.