Key Points
Warren Buffett has loaded up on Alphabet stock in his first few months after stepping down as Berkshire Hathaway's CEO.
He likely sees an attractive valuation and long-term growth prospects.
A key question stood out in the minds of some investors when Warren Buffett passed the torch as Berkshire Hathaway's (NYSE: BRKA) (NYSE: BRKB) CEO earlier this year: What will Buffett do now that Greg Abel is running the company? It didn't take long for that question to be answered.
Buffett certainly didn't retire. He's actively involved with Berkshire's investment strategy. And he made a huge move that should have every investor watching one stock -- Google parent Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL).
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Buffett's big move
Berkshire first initiated a position in Alphabet while Buffett was still CEO. The legendary investor had long maintained that he should have invested in Google earlier. He remedied that error before passing the baton to Abel by buying around 17.8 million shares of the stock in the third quarter of 2025.
However, Buffett more than doubled down on his bet on Alphabet in recent months. After stepping down as Berkshire's CEO, he initiated the move to increase its stake in Alphabet by over 200% during the first quarter of 2026, with Abel's blessing.
That wasn't the end of Buffett's investment activity, either. On June 1, 2026, Alphabet revealed that it had struck a deal to sell $10 billion of its Class A and Class C shares to Berkshire in a private placement.
Alphabet now ranks as Berkshire's fifth-largest holding, making up 6.9% of the conglomerate's equity portfolio. This stake is currently worth roughly $24.3 billion.
What Buffett sees in Alphabet
Alphabet's total revenue jumped 22% year over year to $109.9 billion in the first quarter of 2026. Its earnings nearly doubled to $62.6 billion. Is this sizzling performance why Buffett loaded up on the stock? Nope.
Buffett doesn't focus on a company's single quarterly snapshot. Instead, he focuses on whether its valuation is attractive relative to its long-term earnings growth prospects. And the 95-year-old investor likes what he sees with Alphabet.
Much of those growth prospects stems from Alphabet's Google Cloud business. Google Cloud's backlog topped $460 billion in Q1, nearly doubling from the previous quarter. The integration of Gemini, Google's top-tier AI model, across Google Cloud is a key driver of the tremendous growth.
Buffett's Q1 investments in Alphabet occurred before the communication stock took off in April. But even with the momentum, Alphabet's shares still trade at 25 times forward earnings. That's a historically low multiple for the company.
Worth the risk
Don't think for a second that Buffett hasn't fully evaluated the risks associated with investing in Alphabet. It's possible that the company's massive capital expenditures on its AI infrastructure expansion won't pay off. Generative AI could still eventually disrupt Google Search's lucrative advertising business.
Importantly, though, Buffett knew that Alphabet planned to use the $10 billion from its private placement agreement to fund AI infrastructure. He chose to make the big bet anyway.
I suspect that wager will pay off. Google Cloud can't keep up with customer demand without expanding its capabilities. While the potential for Google Search disruption exists, so far, genAI has boosted search traffic and advertising revenue.
Alphabet also has other growth opportunities. Waymo is the leader in autonomous ride-hailing services, an industry poised to grow much larger over the next few years. Alphabet's Google Quantum AI is a top innovator in quantum computing, another technology that could become a massive market in the next decade.
Buffett doesn't mind taking on risk when he's confident that the potential returns are worth it – and he clearly believes that Alphabet's risk-reward proposition is attractive. Investors wanting to follow where the capital managed by one of the greatest investors of all time is going will want to keep Alphabet at the forefront of their radar.
Keith Speights has positions in Alphabet and Berkshire Hathaway. The Motley Fool has positions in and recommends Alphabet and Berkshire Hathaway. The Motley Fool has a disclosure policy.