Key Takeaways
- Warren Buffett stepped down as CEO of Berkshire Hathaway, but his investment philosophy lives on through successor Greg Abel.
- In Q2 2025 Berkshire increased its Alphabet stake by roughly 48 million shares, worth about $16.3 billion at current prices, making Alphabet the conglomerate’s third‑largest holding.
- Alphabet is aggressively expanding its AI infrastructure, spending “hundreds of billions of dollars” on data centers and leasing excess capacity via Google Cloud.
- Google Cloud’s Q2 revenue surged 82 % year‑over‑year to $24.8 billion, delivering $8.8 billion of operating income and hinting at a potential trillion‑dollar stand‑alone valuation.
- Overall Alphabet revenue grew 24 % YoY; despite a high‑profile P/E spike from one‑time gains, the forward price‑to‑earnings ratio sits around 23× next‑year earnings, a level the author deems reasonable.
- Given the accelerating AI arms race and Alphabet’s strong cloud momentum, the stock is positioned to outperform the market, prompting the recommendation that investors consider following Berkshire’s lead.
Warren Buffett’s Legacy and Greg Abel’s Continuation
“Warren Buffett may be retired from his CEO duties at Berkshire Hathaway (BRKA +0.27%) (BRKB +0.26%), but his influence lives on.” This opening line captures the essence of Berkshire’s post‑Buffett era: while the Oracle of Omaha no longer steers the ship, his disciples continue to execute his time‑tested strategy. Greg Abel, tapped as Buffett’s successor, has demonstrated a clear allegiance to the chairman’s favored picks. Most notably, Abel has kept buying Alphabet (GOOG/GOOGL), a stock Buffett once lamented he did not acquire sooner. The move signals that Berkshire’s capital‑allocation ethos—favoring durable competitive advantages and long‑term growth—remains intact under new leadership.
Details of Berkshire’s Q2 Alphabet Purchase
The scale of Abel’s conviction is evident in the numbers disclosed on Berkshire’s Form 13‑F. “During Q2, Berkshire Hathaway dramatically increased its holdings in Alphabet. It bought about 48 million shares of Alphabet during Q2, which equates to about $16.3 billion at today’s prices.” That single‑quarter infusion catapulted Alphabet to the status of Berkshire’s third‑largest holding when both share classes are combined. Such a sizable commitment underscores not only confidence in Alphabet’s fundamentals but also a willingness to deploy substantial capital when a high‑conviction opportunity arises—a hallmark of Buffett’s own approach during his tenure.
Alphabet’s AI Infrastructure Investment
Alphabet’s recent spending spree is centered on artificial intelligence. The article notes that the company “is spending hundreds of billions of dollars on data centers to build out its AI computing footprint, but it’s not using all of that internally. Instead, it’s renting some of its capacity to other companies via Google Cloud, its cloud computing platform.” This dual‑use strategy transforms costly capex into a recurring revenue stream, allowing Alphabet to monetize its AI infrastructure while simultaneously strengthening its own product suite. The relentless build‑out reflects a strategic bet that AI will become a foundational utility, much like electricity or broadband, and that early‑mover scale will translate into durable margins.
Google Cloud’s Explosive Growth
The payoff of that infrastructure push is already visible in Google Cloud’s performance. “In Q2, Google Cloud’s revenue increased an impressive 82% year over year to $24.8 billion and generated $8.8 billion in operating income.” Such growth rates are rare among mature tech giants and suggest that the cloud division is rapidly scaling beyond a mere adjunct to Alphabet’s advertising empire. The piece goes further, speculating that “Google Cloud as a stand-alone business could potentially receive a trillion‑dollar valuation,” a figure that, while ambitious, illustrates the market’s perception of Cloud as a high‑growth, high‑margin engine capable of sustaining Alphabet’s overall valuation trajectory.
Broader Alphabet Performance and Valuation
Beyond cloud, Alphabet’s core businesses continue to fire on all cylinders. “Alphabet’s other businesses also did well, and the company’s overall revenue soared 24% year over year.” This top‑line expansion occurs despite macro‑economic headwinds that have pressured many peers. The article tempers enthusiasm by noting that “Thanks to one-time effects from gains on investments, Alphabet’s price-to-earnings ratio is out of whack.” Consequently, the author prefers a forward‑looking metric: “At about 23 times next year’s earnings, Alphabet isn’t the cheapest stock in the world, but it’s also not terribly overvalued.” A forward P/E in the low‑20s places Alphabet comfortably within a range historically associated with steady, above‑average growth, especially when backed by a secular tailwind like AI.
Investment Outlook and Recommendation
Looking ahead, the confluence of AI‑driven demand, a fortified cloud franchise, and a reasonable valuation paints an optimistic picture. The author asserts, “I think Alphabet is in a great spot to continue growing rapidly as more AI computing capacity comes online, and should easily outperform the market over the next few years as the AI arms race heats up.” This perspective mirrors Buffett’s own philosophy of buying wonderful companies at fair prices and holding them for the long haul. For investors watching Berkshire’s moves, the takeaway is clear: following Abel’s lead and adding Alphabet to a diversified portfolio could capture the upside of a company that is not only executing on its AI vision but also generating substantial, tangible cash flows today. By aligning with Berkshire’s conviction, shareholders may position themselves to benefit from what many consider the next chapter of technological advancement.
https://www.fool.com/investing/2026/08/30/warren-buffetts-successor-greg-abel-keeps-buying-t/