Berkshire's Big Bet on Alphabet: What's Next for the Cheapest Mega-Cap AI Name
Berkshire Hathaway's massive increase in its Alphabet stake has turned investor attention to the search giant. The company raised its Alphabet position by 658% last quarter, and 24/7 Wall St. rates GOOG a BUY with a $445 price target.
Alphabet trades at 17x trailing P/E versus Microsoft's 28x and Meta's 22x, making GOOG the cheapest mega-cap AI name by valuation. Google Cloud's $514 billion backlog and 82% revenue growth support a $511 bull case, while massive 2026 capex remains the key risk.
Bulls point to Google Cloud's $514 billion backlog, up more than $50 billion sequentially, with nearly 90% of the Fortune 100 using Gemini Enterprise. The company's cloud operating margin expanded to 35.6% from 20.7%, tripling operating income.
The bear case centers on 2026 capex guidance of $175 to $185 billion plus a suspended buyback and long-term debt swelling from $46.5 billion to $98.2 billion, raising ROIC questions. Interest expense rose roughly 5x YoY.