Buffett’s Alphabet Blessing Puts Valuation Paradox Back in Focus

Core Viewpoint - Alphabet Inc. has experienced a significant stock rally, raising concerns about whether the stock is becoming too expensive after previously facing fears of being negatively impacted by the AI revolution [1]. Group 1: Stock Performance - Alphabet's shares have increased nearly 60% this year, making it the top performer among the Magnificent Seven technology giants [2]. - The stock is the second largest contributor to the S&P 500 Index's approximately 15% gain in 2025, following Nvidia Corp [2]. - The stock gained as much as 4% in early trading in New York after the latest version of the company's Gemini AI model received positive feedback from Wall Street [4]. Group 2: Market Valuation - The rally has led to Alphabet's market valuation reaching historically high levels, with the stock trading at 25 times forward earnings, a level not seen since 2021 and significantly above its 10-year average of around 20 times [5]. Group 3: Investor Sentiment - Warren Buffett's Berkshire Hathaway purchased a stake in Alphabet worth approximately $4.9 billion during the third quarter, indicating strong investor confidence [3]. - Portfolio managers believe Alphabet is well-positioned to benefit from current economic conditions and advancements in AI technology, suggesting a potential leadership role in the AI sector [4][6].