Buffett Buys Google: Inside Berkshire’s $4.3B Bet on Alphabet and the 2004 IPO Connection
In a move that signifies a remarkable full-circle moment in financial history, Warren Buffett’s Berkshire Hathaway has officially disclosed a massive stake in Alphabet, the parent company of Google. Late Friday, the conglomerate revealed it holds approximately $4.3 billion in Alphabet stock as of the end of the third quarter, propelling the tech giant to the 10th largest position in Berkshire’s equity portfolio. This investment caused Alphabet shares to jump 3% on Monday, signaling market approval of the union between the "Oracle of Omaha" and the Silicon Valley titan. The timing is particularly poignant as the 95-year-old Buffett prepares to step down as CEO later this year, handing the reins to Greg Abel with one final, significant technology play.
The relationship between Buffett and Google’s founders, Larry Page and Sergey Brin, actually predates this investment by over twenty years. When Google filed for its IPO in 2004, the founders penned an "Owner’s Manual" for shareholders that was explicitly modeled after Buffett’s famous essays. In a footnote to their prospectus, Page and Brin credited Buffett’s philosophy as the inspiration for their refusal to "smooth" quarterly earnings, prioritizing long-term opportunities over short-term market appeasement. For two decades, the admiration was seemingly one-sided, but this new multi-billion dollar stake confirms that the respect is now mutually profitable.
From a valuation perspective, Alphabet currently presents a classic "Buffett-style" value proposition, despite being a high-growth tech stock. Trading at roughly 26 times next year’s earnings, Alphabet is significantly cheaper than its AI-driven peers like Microsoft (32x), Nvidia (42x), and Broadcom (51x). This relative undervaluation comes even as the company notched its first $100 billion revenue quarter, fueled by a booming cloud unit and a $155 billion customer backlog. For Berkshire, which has historically avoided high-flying tech stocks due to valuation concerns, Alphabet now offers a rare combination of reasonable pricing and dominance in the burgeoning artificial intelligence sector.
This investment also serves as a correction of sorts for Buffett, who has publicly admitted to missing the boat on Google in the past. In 2017, he expressed regret for not buying shares earlier, noting that his own subsidiary, Geico, was paying substantial sums to Google for advertising—a clear indicator of the search engine's "moat." While Berkshire eventually bought into Amazon in 2019 and made Apple its largest holding, the Google omission had remained a glaring gap in the portfolio. By finally pulling the trigger, Berkshire is solidifying its exposure to the modern tech economy just as Alphabet’s cloud and AI chips begin to differentiate it from competitors.
Beyond financials, the alignment between the two companies extends to their corporate governance structures. In their 2004 IPO, Page and Brin implemented a dual-class stock structure to maintain voting control, a move they defended by citing Berkshire Hathaway as a successful precedent. They argued that, much like Berkshire and legacy media companies such as The Washington Post, a dual-class structure allows management to focus on long-term interests rather than being held hostage by quarterly fluctuations. This shared philosophy on governance likely makes Alphabet a more comfortable hold for Berkshire compared to other Silicon Valley firms with less shareholder-friendly structures.
Ultimately, this $4.3 billion bet is a significant seal of approval for Alphabet as it navigates the competitive AI landscape. With Page and Brin now ranked just behind Buffett on the Forbes billionaires list, the investment symbolizes a convergence of traditional value investing and modern technological innovation. As Buffett prepares to exit his role, leaving a portfolio that now includes Apple, Amazon, and Google, he leaves behind a legacy that evolved to embrace the very companies he once viewed from a distance—companies that were built on the very principles he championed decades ago.