Why Buffett's Alphabet Investment Is Actually a Masterplay on Apple's AI Future

The Hidden Connection: Gemini Powers Siri

Most investors missed the real story behind Berkshire Hathaway’s recent Alphabet purchase. Last quarter, Warren Buffett’s team made a $4.3 billion bet on Alphabet stock—marking the conglomerate’s first Alphabet investment. On the surface, this looks like Buffett finally entering the pure tech space. But the timing reveals something deeper: Apple just signed a deal to pay Alphabet $1 billion annually to license Gemini, its large language model, for powering Siri.

This isn’t a random coincidence. Buffett has repeatedly stated he regrets not investing in Alphabet earlier. Yet the timing of this Alphabet purchase, combined with Apple’s AI partnership announcement, suggests Buffett is playing a longer game—essentially betting on both companies’ AI ambitions simultaneously.

The Apple Position: Trimming, Not Dumping

Here’s where the narrative gets interesting. While Berkshire loaded up on Alphabet, it simultaneously trimmed its massive Apple stake. The conglomerate sold approximately 41.8 million shares in Q3, representing about 14.9% of its Apple position as of Q2. At average quarterly prices, these sales realized around $9.4 billion.

But here’s the critical detail: despite selling over $9 billion worth of Apple shares, Berkshire’s remaining stake actually grew in value by $3.2 billion thanks to price appreciation during the quarter. Apple still remains the largest single position in Berkshire’s equity portfolio, representing just over 21% of total holdings.

Compare this to the end of 2023, when Apple represented a bloated 50% of Berkshire’s equity value. That concentration was unsustainable. Buffett himself has emphasized the importance of portfolio diversification—even for legendary “set and forget” investors. The reduction wasn’t a vote of no-confidence; it was portfolio hygiene.

The Valuation Reality Check

Apple currently trades at a P/E ratio of 37, despite growing relatively slowly. That premium is driven by the company’s brand strength and stability, not earnings momentum. Meanwhile, Apple stock has underperformed the broader market this year, even as it recently recovered some ground.

Consider the context: Nvidia took the “world’s most valuable company” crown from Apple this summer, signaling a market rotation toward pure AI plays. Buffett’s decision to rebalance makes tactical sense—reduce an overweight position in a mature company with stretched valuation, while taking a fresh position in a core AI infrastructure player.

Siri’s AI Catch-Up: The Strategic Angle

The Gemini partnership explains Buffett’s confidence in Apple’s future despite the position trim. Apple had been losing ground in the AI voice assistant race. By licensing Gemini, Apple gets Alphabet’s cutting-edge LLM technology running on Apple’s private servers, enabling Siri to dramatically improve its summarization and planning capabilities.

This deal structure is brilliant: Apple pays Alphabet for AI competence while maintaining user privacy on proprietary hardware. It buys Apple time to develop its own LLMs without ceding market share to competitors like Google Assistant or Siri alternatives.

Reading Between the Moves

So what’s Buffett really saying with these purchases? He’s confident in Apple’s ability to adapt and compete in the AI era. He’s bullish on Alphabet as an AI infrastructure and technology provider. And he’s rebalancing his massive Apple position to more reasonable levels while staying exposed to both companies’ growth.

The investment in Alphabet isn’t a replacement for Apple—it’s a complement. By owning Alphabet, Buffett is essentially voting for the entire AI ecosystem that Apple depends on. The $1 billion annual Gemini licensing deal makes that connection crystal clear.

Recent iPhone sales data supports his thesis: the iPhone 17 has been performing exceptionally well, particularly in China. Apple isn’t sitting idle while AI competitors lap it. Neither is Buffett, apparently.

The takeaway: sometimes the biggest investment signals aren’t what you buy or sell—it’s how you buy and sell together. Buffett’s Alphabet bet, paired with his Apple rebalancing, tells a coherent story about his conviction in both companies’ futures.