Alphabet rallies after Berkshire reveals stake. Why Buffett's firm likely bought it

Core Insights - Berkshire Hathaway has made a significant investment in Alphabet, acquiring approximately $4.3 billion worth of shares, marking it as the firm's 10th largest equity holding, which surprised many given Warren Buffett's historical reluctance towards high-growth tech companies [2][3] - Alphabet's stock has seen a substantial increase of 46% this year, driven by its advancements in AI and improved profitability in its cloud services, making it an attractive investment opportunity [4][6] - The investment in Alphabet may indicate a shift in Berkshire Hathaway's approach to technology investments as leadership transitions to the next generation, with Greg Abel set to take over as CEO [5] Investment Details - The investment in Alphabet likely reflects the influence of Berkshire's investment managers, Todd Combs and Ted Weschler, who have been responsible for tech-oriented investments, including a stake in Amazon [3] - Despite the recent rally, Alphabet's valuation remains lower than that of its AI-driven peers, trading at 25.5 times next year's earnings compared to Microsoft at 32.0, Broadcom at 50.8, and Nvidia at 41.9, which may have made it particularly appealing to Berkshire's team [6] Historical Context - Warren Buffett has acknowledged missing out on investing in Google as one of his biggest mistakes, having witnessed its early success through Geico, one of its first major advertisers [6][7]