Warren Buffett bet that Alphabet would tap into the AI boom, and he’s still helping lead the charge at Berkshire Hathaway, says Greg Abel.
The legendary investor was succeeded by Abel at the beginning of this year, after almost sixty years as CEO of Berkshire. During a rare broadcast interview with CNBC on Wednesday, Abel shed light on Buffett’s surprise technology bet and his continued role as chairman.
The Berkshire CEO explained why Buffett built a nearly $38 billion stake in Alphabet in less than a year. Google’s parent company was the third-largest holding in Berkshire’s stock portfolio end of June.
Abel pointed to the material impact of AI on businesses and beyond, with Berkshire a ‘a lot of visibility” in AI and its benefits through its numerous subsidiaries, and Alphabet is a “major player” in the space.
“Now there is one much more for Google than what I just said about why we like it, but those were the fundamental reasons why we took a serious look at Google and have now made a significant investment in it,” Abel said.
Berkshire strengthened its stake in Alphabet earlier this year by participating in a private placement. Abel said Berkshire was invited to participate in late May, and he promptly called Buffett to discuss the opportunity. The consultation with his predecessor was “very consistent with the way we run Berkshire,” Abel said.
The pair agreed on a $10 billion investment at a 6.5% discount to Alphabet’s market price, Abel said. went forward.
Buffett has avoided technology companies for most of his career, preferring to invest in more predictable, attractively valued companies that he understands well.
But Alphabet and Berkshire have a shared DNA. The bosses of Alphabet modeled after Berkshire and its web of decentralized, autonomous subsidiaries following a visit to Buffett in Omaha in the mid-2000s. In addition to Google, Alphabet is the parent company of YouTube, Android, Waymo and others.
Google co-founders Larry Page and Sergey Brin also said that Buffett’s essays and the “user guide” for Berkshire shareholders were the main inspirations for the shareholder letter they included in Google’s 2004 IPO prospectus.
Buffett previously broke with tradition when he bought Apple in 2016. The iPhone maker has proven to be one of its own most successful investmentsand remains Berkshire’s largest stock position.
Buffett and Abel
Alphabet’s position is one of many talking points for Berkshire’s chairman and CEO, Abel said.
He and Buffett have a “great working relationshiphe told CNBC, frequently speaking as “we like to talk about business, we like to talk about what we see in our portfolio.”
Berkshire owns dozens of companies, including See’s Candies and Geico, and has billions of dollars in stakes in publicly traded companies such as American Express and Coca-Cola.
Abel, speaking from Japan while visiting Berkshire’s business interests there, told CNBC that he stopped by Buffett’s 96th birthday in Omaha on Sunday, and felt some FOMO from the business icon.
“Warren absolutely loves the Japanese investments,” Abel said, “so I could tell it wasn’t easy for Warren for me to go to Tokyo.”
