Will Warren Buffett and Greg Abel Make Alphabet Berkshire Hathaway's Next Apple?
2026-07-31 08:30
•Bram Berkowitz •The Motley Fool
•••• ••••••• Axe Cap view
Berkshire's Alphabet Bet Tests Buffett's Playbook
Berkshire Hathaway’s sizable move into Alphabet reflects AI optimism but raises classic value questions.
Warren Buffett's Berkshire Hathaway has made a bold shift by pouring over $21 billion into Alphabet this year, marking a clear bet on AI’s promise. Yet, Alphabet’s heavy spending—over $200 billion annually on AI infrastructure—has pushed free cash flow into the red and paused share buybacks, a stark contrast to Apple’s disciplined capital returns that Berkshire has long favoured. For South African investors keeping an eye on rand strength, this move adds complexity; Alphabet's profitability uncertainty could pressure USD/ZAR if global tech sentiment sours. Locally, the cautionary tale mirrors situations at large rand earners like Naspers and Prosus, which are exposed to global tech cycles and high cash burn on innovation. Berkshire’s gamble reflects a need to balance between embracing AI’s disruptive potential while acknowledging capital efficiency risks. If Alphabet fails to monetize AI investments swiftly, Berkshire’s patient, value-driven approach may be tested. this is just our opinion and not financial advice
Watch USD/ZAR closely for tech-driven volatility and avoid jumping into global AI plays blindly. Stick with SA counters like Naspers and Prosus, but trim exposure if rand weakens sharply. Prefer banks like Standard Bank and FirstRand for more stable carry and dividends as a hedge.
- Alphabet (GOOG)
- USD/ZAR
- Naspers
- Prosus
- Alphabet’s persistent negative free cash flow and halted buybacks
- Rand volatility impacting SA tech exporters and FX-sensitive sectors
6/10
Berkshire Hathaway has significantly increased its Alphabet position, making it the fifth-largest holding in its portfolio at 8.1%. This marks Berkshire's first major bet on an AI stock, with the company investing over $21 billion this year. However, Alphabet's massive $200+ billion annual capex spending on AI infrastructure has turned free cash flow negative and halted stock buybacks, raising questions about whether the investment will deliver adequate returns compared to Berkshire's Apple position.
Our take is based on reporting first published by The Motley Fool.