Warren Buffett’s surprise move into Alphabet has stirred up the markets, and Tom is spelling out why the bet looks like a straight-up win.
He said Berkshire’s decision fits the moment, even though Buffett avoided tech stocks for most of his life.
Tom’s own firm, Gardner Russo & Quinn, held $1.1 billion in Alphabet and $1.8 billion in Berkshire at the end of September, making up 31% of its $9.3 billion U.S. stock portfolio.
Tom also said Berkshire bought 17.8 million Alphabet shares last quarter. The stake was worth $4.3 billion on September 30. He noted that the shares may have been bought before Alphabet rallied.
The stock jumped almost 40% from under $180 to $244 in the three months to September 30. It then climbed another 17% to more than $285. If Berkshire got in early, the stake might’ve cost around $3.1 billion, and ended last Monday worth $5.1 billion.
Tracking Berkshire’s timing and Alphabet’s jump
Tom said Alphabet still trades at a “below-market” price-to-earnings ratio even after the run-up. He described the company as a “remarkably solid and strong business.” He pointed to Alphabet’s track record of taking pain in the short term to build for the long run. Tom said the company has a “capacity to suffer,” meaning it spends heavily on long-term projects and doesn’t bend to Wall Street’s push for smooth numbers every quarter.
Tom said Alphabet’s commitment to research and development is something he and his team “look right through” as they judge its future power. He said they also “applaud” Alphabet’s choice to keep funding “moonshots,” the risky bets that may take years to pay off.
He said Alphabet holds a “mountain of cash” like Berkshire because its operations bring in strong cash flow. He added that Alphabet’s role in AI could bring very large returns.
Tom then said there is a real chance Alphabet’s huge AI spending won’t produce the kind of scalable returns that “drive the payback.” Alphabet projected that its capital spending in 2025 will top $90 billion.
He also said the era of “extraordinary margins” for the search business might be ending, even though Alphabet upgraded its search features with Gemini AI.
He pushed back against people calling Alphabet only a tech company. He said it plays a critical role in helping companies reach customers in more precise and effective ways. “You get that right and people beat a path to your door,” he said.
Tom added that Alphabet is “deeply embedded in the commerce of the world,” which he believes can help it handle new competitors even if those rivals have better tools.
Warning about debt and market disruption
Tom then moved to what he thinks is an even bigger threat than an AI crash. He said the surge in U.S. national debt could be “potentially more disruptive” than anything happening in tech. U.S. debt was under $20 trillion in 2016. It is now above $38 trillion, based on Treasury data.
Tom said the “pressure” of paying that debt, along with rising concerns about the dollar’s place as the world’s reserve currency, could lead to a weaker dollar.
He said the most “unexamined” risk sits in the bond and currency markets, and in the global political picture.
“Those who hold our claims have interests that go far beyond just lending to the US, but really supplanting it,” said Tom.
He added that America’s leadership helped lift living standards at home and supported global stability. Pulling back now could block more gains and create new instability.
Tom finished by paraphrasing Charlie Munger. “Never should somebody give their consumer the opportunity, the incentive to look elsewhere for satisfaction,” he said.
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