Warren Buffett’s exit from the helm of Berkshire Hathaway, after an enduring 60-year tenure, marks a pivotal moment for the investment landscape. Despite his stepping down, the investment philosophy he ingrained, centered on long-term holdings, remains manifest in Berkshire’s portfolio composition. Notably, the conglomerate’s recent strategies feature substantial stakes in technology giants Alphabet and Amazon, signaling these companies as likely candidates for considerable appreciation over the coming year.
Alphabet’s Strategic Deployment in Artificial Intelligence
Alphabet, Google’s parent company, has seen a noteworthy resurgence in investor confidence after encountering skepticism about its standing in the artificial intelligence (AI) race. Earlier concerns stemmed from perceptions that competitors might eclipse its dominating search business through more advanced AI capabilities. In response, Alphabet committed an aggressive capital expenditure budget ranging between $91 billion and $93 billion last year, focused substantially on AI development.
These investments manifest in tangible advancements such as the improving performance of its AI model Gemini and the growing operational presence of Waymo, its autonomous vehicle initiative. Moreover, Alphabet's financial robustness is evidenced by the nearly $74 billion in free cash flow recorded in the third quarter over the preceding year—this figure notably does not deduct capital expenditures, underscoring strong operational profitability despite vast investment outlays.
Reflecting the confidence in Alphabet’s prospects, Berkshire Hathaway augmented its holdings by acquiring over 17.8 million shares in the third quarter of 2025, representing an approximate $4.3 billion investment. This buy not only accounts for nearly 2% of Berkshire’s portfolio but also demonstrates the company’s selective approach to deploying its substantial liquidity, reportedly totaling around $382 billion.
Furthermore, Alphabet’s valuation appears compelling relative to its peer group known as the "Magnificent Seven"—a cohort of leading technology firms. Trading at a price-to-earnings (P/E) ratio of 31, it aligns closely with the S&P 500 average and stands as the second most affordably valued member by earnings multiple. This suggests a potential value proposition for investors considering the company’s ongoing innovation and capital investment strategies, positioning Alphabet stock for sustained upward trajectory into 2026.
Amazon’s Leveraged Growth through AI and Infrastructure
Parallel to Alphabet’s journey, Amazon is harnessing AI to bolster its leading status in e-commerce and cloud computing domains. The company disclosed investment of $120 billion in capital expenditures over the last twelve months. Even with this massive capex deployment, Amazon maintained solid financial health by generating $15 billion in free cash flow.
This capital infusion supports various initiatives ranging from the expansion of its cloud service platform AWS to enhanced AI-driven sales analytics and digital advertising optimization. Despite recent fluctuations in its stock price caused in part by increased competition facing AWS from rivals like Google Cloud and Microsoft Azure, the company’s strategic investments signal a commitment to securing and expanding its competitive advantage.
Berkshire Hathaway's involvement with Amazon underscores this belief. The conglomerate largely acquired its shares in 2019 and made minimal dispositions in subsequent years, with such selling activity ceasing by 2023. Presently, Amazon's valuation has become more accessible; its shares now trade at a P/E ratio of approximately 32, only slightly higher than Alphabet’s. This contraction in valuation enhances the appeal of Amazon stock for investors aligned with Berkshire’s approach.
Given the substantial AI integration and capital expenditure programs underway, Amazon's stock is positioned to potentially resume upward momentum as market recognition of these investments’ returns strengthens.
Conclusion
Though Warren Buffett’s direct management of Berkshire Hathaway has concluded, the investment priorities established during his leadership continue to influence the conglomerate’s asset deployment. The prominent stakes in Alphabet and Amazon encapsulate a strategy oriented toward dominant technology firms undergoing significant AI-driven transformation and infrastructure expansion. With solid financial metrics including strong free cash flow generation and compelling valuations, these stocks warrant consideration as potentially outperforming investments in the upcoming year.