Warren Buffett rarely calls his own investments mistakes. He rarely doubles down on ones he still questions. In a July CNBC interview, he did both at once.
Buffett confirmed he personally started Berkshire’s Alphabet position, confessed he should have bought years earlier, and flagged the enormous spending challenge ahead.
Berkshire began buying Alphabet shares in the third quarter of 2025 and has since expanded the position more than sevenfold through open-market purchases and a private placement.
Alphabet showed in its 2026 second-quarter earnings call that it raised its 2026 capital expenditure (CapEx) guidance to as much as $205 billion, pushing free cash flow negative for the first time.
For investors watching Berkshire assemble a roughly $31 billion stake in under a year, these competing signals raise a sharp question about what comes next.
Buffett says he personally built Berkshire’s $31B Alphabet stake
In a July 15 interview with CNBC’s “Squawk Box,” Buffett told Becky Quick he decided to bring Alphabet into Berkshire’s portfolio, ending speculation about its origins.
“I initiated it,” Buffett said, adding that Abel approves of every decision he makes and vice versa, with the two communicating regularly about the portfolio.
Berkshire first purchased roughly 17.8 million Alphabet shares in the third quarter of 2025, a position then worth about $4.3 billion.
By the first quarter of 2026, the conglomerate had more than tripled that stake, putting over $11 billion into open-market trades during a single quarter, Motley Fool reported.
Then in June, Berkshire committed $10 billion more through a private placement at an average price of about $350 per share across both stock classes.
Alphabet’s AI spending bill puts Buffett’s investment framework to the test
Buffett’s endorsement comes with an unusual caveat, because Alphabet’s escalating infrastructure costs have entered territory unlike anything the company has attempted before.
In the second quarter, Alphabet spent $44.9 billion on capital expenditures, exactly doubling what it spent in the same period a year earlier, according to the company’s Q2 2026 earnings release.
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That spending exceeded operating cash flow of $39.1 billion, resulting in negative free cash flow of $5.9 billion, a first in the company’s public history.
Alphabet reported zero share repurchases for a second consecutive quarter after halting its buyback program at the start of 2026, compared with $13.2 billion in buybacks in the year-ago period.
Buffett framed the broader dynamic in blunt terms during his CNBC appearance, describing the hyperscaler spending race as something companies feel locked into.
The hyperscalers “don’t have any choice,” Buffett told CNBC’s Becky Quick, adding that they are “playing a game they don’t want to play.”
Google Cloud’s rapid growth offers a counterweight to capex concerns
Despite the cash flow pressure, Alphabet’s underlying business posted results that reinforce the investment framework Buffett described in the same interview.
“The trick in life is to find businesses that are going to earn high returns on capital for an extended period of time,” Buffett told CNBC.
Google Cloud revenue surged 82% year over year to $24.8 billion in the second quarter, while the division’s backlog climbed to $514 billion, the earnings release stated.
That backlog grew by $50 billion in a single quarter, signaling strong enterprise demand for Alphabet’s AI computing infrastructure and cloud services.
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Sundar Pichai, chief executive officer of Alphabet and Google, told analysts on the second-quarter 2026 earnings call that the company views its current AI investment cycle as the beginning of a fundamental and long-lasting transformation.
“It feels like we are in very early innings of what feels like a secular shift across multiple areas … All of that looks like extraordinary opportunities with extraordinary returns for executing well on those opportunities,” Pichai said.
Total revenue for the period reached $119.8 billion, a 24% increase from the same quarter of 2025, with Google Search contributing $63.3 billion and YouTube advertising adding $11.1 billion.
When Berkshire first disclosed its Alphabet stake in November 2025, Steve Sosnick, chief strategist at Interactive Brokers, told Fox Business that “Alphabet fits the value-investing theme better than some of the other names that are leading the AI charge right now.”
Buffett echoed that view in his CNBC interview, saying Alphabet is ‘more likely to be a winner based on their record than probably 90% or 95% of what gets merchandised through Wall Street.’
Investors face a bet on Alphabet’s durability
Buffett’s enthusiasm for Alphabet stops well short of the conviction he has shown toward portfolio anchors like Apple, which represents roughly 22% of holdings, Motley Fool reported.
He told CNBC he does not favor Alphabet as much as at least four or five other businesses Berkshire currently owns, tempering the position’s bullishness.
Alphabet’s paused buybacks mark a departure from the shareholder returns that have historically drawn Berkshire to its core holdings, including Apple’s $850 billion repurchase history.
Whether Berkshire expands the Alphabet stake or holds at current levels depends on how quickly $514 billion in cloud backlog converts into sustained margin growth.
For now, Buffett has placed his bet on Alphabet’s durability while questioning the broader AI spending race the investment depends on, Fortune’s reporting indicated.
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