It will be the first time since going public that Berkshire will have a leader other than Warren Buffett.
Warren Buffett is likely to go down as one of the greatest investors of all time.
Despite the big change, Buffett and his team recently initiated a large new position in an artificial intelligence stock that has crushed it in its 11 years as a public company.
With just days remaining in 2025, soon Warren Buffett will no longer be the CEO of Berkshire Hathaway for the first time in decades. It’s a significant change for the company, which has long had a substantial portion of its reputation tied to Buffett.
Greg Abel will replace Buffett, while the Oracle of Omaha will stay on as chairman of the board of directors.
While Berkshire has been relatively conservative over the past few years, purchasing few stocks and not even repurchasing many of its own shares, the large conglomerate has piled into an artificial intelligence (AI) stock that has been a 10-bagger since its initial public offering in 2014.
Image source: The Motley Fool.
During the third quarter, Berkshire initiated a new position in the search giant Alphabet(NASDAQ: GOOG)(NASDAQ: GOOGL), purchasing more than 17.8 million shares for a total value of more than $4.3 billion at the time.
Every stock in the “Magnificent Seven” has benefited from the rise of AI in recent years, including Google, which has seen a roughly 1,000% increase in value since its IPO in 2014. As they are already huge tech stocks, investors view this group as best positioned to capitalize on a potentially life-changing technology. While all of these stocks have done incredibly well, Alphabet lagged the group in terms of valuation earlier this year for several reasons.
One major issue involved a U.S. Department of Justice (DOJ) lawsuit, which alleged that Google had employed monopolistic practices in its search and digital advertising businesses to maintain its dominant 90% market share in search. U.S. District Court Judge Amit Mehta sided with the DOJ and ruled Google a monopoly, but the big question was whether Mehta would grant the DOJ’s request to require Google to divest its Chrome web browser, which is a big component of the company’s search business.
Mehta ultimately did not require Google to do this, citing competition from conversational AI chatbots like OpenAI’s ChatGPT, which could eventually erode Google’s grip on the search market. Mehta’s ruling also allowed Google to continue making payments to companies like Apple to have the company’s web browser, Safari, continue using Google as its default search engine. Investors viewed the ruling as a big win for Google.
This ties into another big concern investors have had with Google this year — specifically, how these fast-growing chatbots could eventually cut into Google’s search dominance, considering hundreds of millions of consumers have turned to them for information-gathering purposes.
However, Google seems to have convinced investors that it has strong enough AI capabilities to ward off competition. Investors seem to have come around to the company’s AI overviews, which provide quick summaries to answers at the top of most search queries. The company then rolled out AI Mode, which offers an experience similar to ChatGPT. Google also recently unveiled its new Gemini 3 AI model, which will supposedly allow consumers to get better answers to their questions with less prompting.
Buffett and his team at Berkshire nailed the timing with their investment in Alphabet. The stock is up more than 27% since the end of the third quarter and now 62% on the year. Alphabet’s strong performance has helped its valuation catch up, although it’s still in the bottom half of the Magnificent Seven, trading at roughly 29 times forward earnings.
Investors will need to closely monitor developments in the company’s search business, which drives more than half of Alphabet’s revenue. While the company appears to have mounted a strong defense, it still faces a fierce group of competitors, including those utilizing AI chatbots.
That said, Alphabet has many strong and fast-growing businesses, including YouTube, Google Cloud, Waymo, and a chip business, so it’s not completely reliant on AI. While all members of the Magnificent Seven could be vulnerable to a pullback, given broader concerns over AI, I still think Alphabet is a strong pick within this group.
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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Apple, and Berkshire Hathaway. The Motley Fool has a disclosure policy.
