1 Unstoppable Artificial Intelligence (AI) Stock That Berkshire Hathaway Bought When Warren Buffett Was Still CEO

Core Viewpoint - Berkshire Hathaway has made a significant investment in Alphabet, marking a notable shift in its investment strategy towards technology, particularly artificial intelligence [2][5]. Company Investment - Berkshire Hathaway now holds a $5.4 billion stake in Alphabet, making it the 14th-largest position in its public equities portfolio [5]. - This investment reflects a vote of confidence in Alphabet's business model and growth potential, despite Warren Buffett's historical reluctance to invest in tech stocks [3][5]. Financial Performance - Alphabet reported a 32% operating margin in 2025 and generated $73 billion in free cash flow during the year, indicating a strong financial position [7]. - The average price-to-earnings ratio for Alphabet shares in Q3 2025 was 22.3, suggesting an attractive valuation at the time of Berkshire's investment [7]. Competitive Advantages - Alphabet possesses a wide economic moat supported by network effects in its Search and YouTube platforms, along with valuable intangible assets such as brand and data [6]. - The company benefits from significant switching costs for Google Cloud customers and a major cost advantage due to its scale [6]. AI Leadership - Alphabet is recognized as a leader in the AI sector, with its Gemini app achieving 750 million monthly active users in Q4 2025 [10]. - Google Cloud's revenue surged by 48% in Q4, driven by high demand for its AI-related services [10]. Advertising Revenue - AI integration enhances user experience across Alphabet's applications, which in turn supports higher engagement and ad revenue, a critical area as ads account for 72% of sales [11]. - Alphabet is leveraging AI to improve targeting capabilities and creative efforts for its advertising clients [11]. Future Outlook - The company plans to invest approximately $180 billion in capital expenditures in 2026 to expand its AI-related infrastructure and meet strong demand [12]. - Current shares are considered reasonably priced with a P/E multiple of 27.8, indicating potential for long-term performance [12].