Buffett's Alphabet Bet May Actually Be a Masterclass in Backing Apple's AI Future

The Puzzle Behind Berkshire’s Tech Pivot

Last quarter, Warren Buffett and Berkshire Hathaway made a head-turning move: they bought Alphabet(NASDAQ: GOOG) stock for the first time, marking a rare venture into pure-play tech territory. At the same time, the conglomerate continued its measured retreat from Apple(NASDAQ: AAPL), offloading nearly 41.8 million shares—roughly 14.9% of their Q2 position—worth around $9.4 billion.

On the surface, this looks like Buffett is abandoning his tech-averse stance and ditching his crown jewel. But dig deeper, and it tells a different story entirely.

The Gemini-Siri Connection Changes Everything

The real unlock came when Bloomberg revealed what Berkshire’s investment team likely already knew: Apple and Alphabet had just inked a landmark AI partnership. Apple will pay Alphabet $1 billion annually to license Gemini, Alphabet’s large language model, to supercharge Siri’s capabilities.

This wasn’t just any deal. It was Apple’s strategic answer to its AI gap. While competitors have raced ahead in generative AI, Siri had fallen behind. By tapping Gemini’s power, Siri could finally deliver the summarization, planning, and complex task handling that modern users expect. And here’s the kicker: Apple’s custom version runs on private Apple servers, keeping data security intact while leveraging Alphabet’s LLM infrastructure.

From an investment lens, Buffett’s Alphabet purchase becomes clearer. He’s not abandoning Apple—he’s hedging and amplifying his bet simultaneously. By owning Gemini’s provider, he’s betting on the technology that powers Apple’s AI comeback.

Apple Reduction Doesn’t Mean Abandonment

Yes, Berkshire trimmed its Apple stake from 50% of its equity portfolio at end-2023 to just over 21% today. But consider the context: even after selling $9.4 billion worth of shares, Apple’s position still grew by $3.2 billion in value that same quarter thanks to stock appreciation. That’s not a vote of no confidence—it’s basic portfolio rebalancing.

Apple remains Berkshire’s single largest holding. Buffett has repeatedly praised Tim Cook and the company’s moat, and he’s publicly stated he’ll never close the position entirely. The trim was likely driven by two factors:

Valuation concern: Apple trades at a P/E ratio of 37, a significant premium for a company growing relatively slowly. While the stability premium is earned, the price had gotten stretched.

Concentration risk: Holding 50% of your equity portfolio in one stock, even a fortress like Apple, is indefensible portfolio construction. Even “set it and forget it” investors need periodic rebalancing.

Recently, Apple stock has gained momentum on the back of strong iPhone sales, particularly the iPhone 17’s traction in China and robust U.S. demand. That performance supports the narrative that Buffett’s reduction was tactical, not strategic.

Investing in Alphabet is Investing in Apple’s Trajectory

The $4.3 billion Berkshire deployed into Alphabet wasn’t a pivot away from tech—it was a precision investment in the infrastructure powering Apple’s future. By owning stakes in both the platform (Apple) and the AI engine (Alphabet/Gemini) driving its next phase of growth, Buffett is placing a sophisticated bet.

He’s also following his own long-stated regret: wishing he’d invested in Alphabet earlier. The company checks his boxes—durable competitive advantages, rational management, strong free cash flow, and now, a deepening partnership with one of the world’s most valuable brands.

The Verdict: This Vote of Thanks Goes Both Ways

Buffett’s moves in Q3 weren’t contradictory. They were complementary. The Alphabet purchase validates Apple’s strategic direction, while the Apple trim reflects prudent portfolio hygiene. By owning both companies and understanding how Gemini will power Siri’s renaissance, Berkshire positioned itself to benefit whether you view this as a tech play or a consumer tech play.

Apple hasn’t lost Buffett’s faith. It’s just gained a partner—one that Buffett now has a financial stake in backing.