Update shared on 15 Nov 2025
Fair value Increased 13%1. Why Berkshire’s Investment Matters to Markets
Even though Berkshire’s stake in Google isn’t large relative to Alphabet’s massive market cap, it carries powerful signalling value:
Buffett’s “Quality Signal” → Higher Perceived Moat
When Berkshire adds a company to its portfolio, markets generally interpret it as:
- The business has durable competitive advantages
- Long-term earnings power is strong
- Management quality is high
- Shareholder returns are likely to compound predictably
For Alphabet, Berkshire’s move reinforces the idea that Google’s moat in AI, Search, YouTube, Android, Maps, and Cloud is still wide, durable, and undervalued relative to long-term earnings.
This can push investors to apply a slightly higher valuation multiple.
2. Buffett Historically Buys Only When He Sees:
Berkshire only buys companies with:
- High returns on capital
- Predictable cash flows
- Strong moats
- Low probability of permanent capital loss
- Management teams are committed to long-term value
Alphabet fits that profile beautifully.
Result: Alphabet may gain a “Buffett premium” — not huge, but meaningful.
3. Historical Evidence: What Happens When Berkshire Buys a Tech Stock?
Apple (2016 onwards)
When Berkshire built its massive Apple stake:
- The market began viewing Apple as a high-quality cash-compounder, not a cyclical hardware company
- The P/E multiple expanded significantly
- The stock went on to 8–9x gains over the next several years
- Buffett’s buying pulled in more institutional capital
This is one of the clearest real-world examples of valuation re-rating triggered by Buffett’s endorsement.
Amazon (2019)
Even a small Berkshire stake led to a sentiment boost — reinforcing Amazon’s long-term compounding narrative.
Snowflake (2020)
Buffett's investment in a cloud data platform legitimised the entire data-infrastructure segment.
4. Why Alphabet Specifically Benefits From a Buffett Endorsement
A. “Ad business” stigma fades
Some investors still think of Google as:
- Advertising-dependent
- Potentially at risk from AI search disruption
- Regulation-heavy
Berkshire’s stake signals:
Google is a long-term compounding machine, not an easily disrupted ad business.
B. Reinforces Alphabet’s AI leadership
If Buffett’s team is buying, they’re saying:
AI is additive — not destructive — to Google’s future cash flows.
C. Reinforces long-term undervaluation
Alphabet historically trades at a discount vs. peers like Microsoft, Meta, Nvidia, etc.
Buffett’s stamp of approval helps support the idea that Alphabet is undervalued vs. long-term AI-led cash flows.
5. Expected Valuation Impact (Practical)
➡️ Not a fundamental valuation change
Berkshire taking a stake does not change Alphabet’s:
- Cash flows
- Terminal value
- Revenue growth
- Margins
- Discount rate
So it does not directly raise intrinsic valuation.
➡️ But it DOES influence:
• Market sentiment
• Institutional flows
• Perceived quality
• Analyst models
• Multiples (P/E, PEG, EV/FCF)
Alphabet’s multiple could expand by 1–3 turns of P/E simply due to increased confidence — especially among conservative funds.
6. How Much Will This Matter Long-Term?
Berkshire is famous for owning companies forever.
If Berkshire keeps adding to the position over time, expect:
- Multiple expansion
- Lower volatility
- Stronger institutional ownership
- Alphabet is being viewed increasingly as a “quality compounder”
- Better support during market sell-offs
These all meaningfully support valuation over long horizons.
Disclaimer
The user oscargarcia has a position in NasdaqGS:GOOGL. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.