Warren Buffett has a confession: He missed the boat on Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL).
The 95-year-old chairman of Berkshire Hathaway (NYSE: BRKA)(NYSE: BRKB) told CNBC on Wednesday that he personally initiated his company's investment in the Google parent. He also admitted he should have bought in years ago, back when Alphabet was "asset-light and a markets darling."
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So, Buffett is making up for lost time. Berkshire now holds roughly $31 billion in Alphabet stock: about $21 billion in public shares, plus a $10 billion private placement that was part of Alphabet's $80 billion equity raise in June. At this point, it's the fifth-largest holding in Berkshire's portfolio, behind Apple, American Express, Coca-Cola, and Bank of America.
The timing is notable. Bond markets are getting nervous about artificial intelligence (AI) infrastructure spending. Tech titans spent roughly $1 trillion on data centers last year, and a Motley Fool research report shows construction plans totaling $4 trillion from now to 2030.
According to Apollo Global Management, coverage ratios for hyperscaler bonds dropped from nearly 5x in February to under 2x in July.
In other words, investor appetite for AI-related bonds has cooled significantly; back in February, buyers wanted 5 times as many bonds as were offered, but by July, that ratio had dropped to less than double. The mood is still bullish, but significantly less than before.
The "who holds the risk if AI returns are delayed" question is getting louder. It's like a trillion-dollar game of hot potato.
Buffett's answer, apparently, is that Alphabet won't be the one left holding the bag.
Unlike competitors leaning on bonds, private credit, and off-balance-sheet structures to fund data centers, Alphabet raised equity. That's dilutive to shareholders, but it doesn't saddle the company with debt service. Buffett isn't lending money to the AI build-out. He's buying an ownership stake in a company he thinks will outlast most of the competition as the AI boom plays out.
"They're more likely to be a winner based on their record than probably 90% or 95% of what gets merchandised through Wall Street," Buffett said.
Source: Yahoo Finance Top News — This article was automatically imported from the source. Read full article at original source →
