Rudi's View | 10:00 AM
Did Berkshire just buy exposure to AI? And why today's share market looks a lot like 2016.
By Rudi Filapek-Vandyck, Editor
Buffett's Parting Message
By Rudi Filapek-Vandyck, Editor
Only a few more weeks to go before Warren Buffett (95) hands over the chief-executive responsibilities at Berkshire Hathaway to Greg Abel (63) as of 1st January 2026.
Buffett is staying involved as chairman of the board. His final episode as CEO includes one additional pivotal signal to all the fans and the broader, global investment community as Berkshire's latest public filing revealed Alphabet (Google) has been elevated to a fresh top ten holding for the Berkshire US equities portfolio.
This signal is one of many indicators suggesting savvy investors are accumulating exposure to AI beneficiaries and technology companies, even if this is not yet apparent from related share prices on the ASX.
Another Wall Street legend, Stanley Druckenmiller's Duquesne Family Office, has offloaded all equity in Nvidia, but increased exposure to AI hardware and chip infrastructure more broadly.
This strategy pivot is widely seen as Druckenmiller turning less comfortable with crowded trades, such as Nvidia, but staying the course on the 2020's enduring megatrends.
In my humble opinion, the decision at Berkshire to purchase 17.8m shares worth US$4.3bn in Alphabet and make this new investment one of the largest in the equities portfolio sends an incredibly strong signal to the rest of the world.
?
Alphabet is part of the Magnificent Seven group of megacompanies that dominates indices in the US, its shares are up 46% year-to-date, and 218% over the past five years.
Equally important to highlight: throughout all the volatility and share market turmoil of late, the Alphabet share price has only weakened by circa -5% from its all-time record high, and that retreat only occurred very recently, so Berkshire has been purchasing on the relentless trend upwards.
Let's not forget: Alphabet is not simply a happy participant in today's AI technology development, this company is one of the crucial drivers behind AI's global build-out and ongoing development.
The company is rolling out a "full-stack" AI strategy, including search, YouTube, Android, Google Cloud, custom chips and Gemini-branded foundation models. Investments include AI data centres and the acquisition of Windsurf, for AI-assisted coding.
Amidst all the angst and relentlessly repeated warnings about FOMO bubbles, over-valuations and likely sharp sell-offs awaiting US markets, what does this tell us about what Buffett & Co are thinking?
Time to roll out my absolute favourite observation covering the multiple decades past when Buffett and soulmate the late Charlie Munger would organise an annual 'love' fest for fans around the globe who would travel in large numbers to hear wise words spoken by both oracles at the AGM in Omaha, only to travel back home and then buy stocks in beaten-down, low-quality, micro-cap, hyper-cyclicals that neither Buffett or Munger would ever give two seconds of their attention.
Humans. We buy into a narrative and once we're in, we never ever want to separate from it, no matter what.
In this particular case, it's the myth that in order to emulate the most quoted and revered investor of our lifetime, we must concentrate our attention and portfolio allocations to the lowest priced assets on the market, no matter the specific reason or context.
Time to wake up. According to CNBC, Alphabet shares are trading on 27x times next year's (forward-looking) EPS forecast. While this is significantly lower than the multiples enjoyed by Nvidia (40x), Microsoft (38x) and Amazon (37x), it also is above the market average of circa 24x (S&P500).
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