Warren Buffett does not usually sign his work, but in a recent interview he made clear that Berkshire Hathaway’s Alphabet position was his call. That matters because the Oracle of Omaha has spent six decades avoiding technology stocks, and when he breaks that pattern the market takes notes. Berkshire first bought in the third quarter of 2025, just months before Buffett’s planned retirement at year end, then doubled down earlier this year with a $10 billion private placement earmarked for Alphabet’s AI infrastructure build-out.
The numbers since then have been the kind that make value investors uncomfortable in a good way. Cloud revenue grew 63 percent in the most recent quarter, and cloud operating income didn’t just rise, it tripled. Buffett and his successor Greg Abel have argued that the key to investing is finding businesses that can earn a high return on capital for a long time, and they believe Alphabet’s custom silicon gives it exactly that runway.
The structural edge is the Tensor Processing Unit, a chip line Alphabet started developing more than a decade ago and has iterated ever since. Because the entire software and hardware stack is optimized around TPUs, the company trains its Gemini frontier models at a materially lower cost than rivals dependent on Nvidia GPUs. That same advantage shows up in inference, where every query costs less to serve, and it flows through to the cloud business where Anthropic is now placing large TPU orders through Broadcom, a potential high-margin revenue stream that didn’t exist a year ago.
Skeptics will note that Buffett’s tech track record is thin and that AI capital intensity could still turn into a money pit. But the counter-argument is already in the financials: cloud profits are accelerating faster than revenue, a rare dynamic in infrastructure-heavy businesses. The distribution moat from search and the ad network only compounds the advantage, letting Alphabet monetize AI on both the consumer and enterprise sides without buying customers.
What to watch next is whether the TPU franchise can scale beyond Google’s own workloads. Broadcom’s involvement suggests a merchant silicon model is emerging, and if Anthropic’s orders become a trend the economics shift from defensive cost savings to offensive revenue. Buffett has never been one to chase hype, but he has always been willing to pay up for a toll bridge, and right now, Alphabet looks like it owns the only bridge that runs on its own chips.