Berkshire's $50 Billion Vote of Confidence Meets Wall Street's AI Spending Anxiety
Published on 07/27/2026 at 15:40 | Redaktion boerse-global.de
The math at Alphabet is getting harder to ignore. Revenue surged 24 percent to $119.8 billion in the second quarter. Cloud revenue alone jumped 82 percent to $24.8 billion. Operating profit climbed 30 percent to $40.8 billion. Yet the stock sits at €285.60, nearly 19 percent below its May record of €350.75, and the narrative around the Google parent has fractured into two irreconcilable camps.
One camp sees a company executing brilliantly, using its core businesses to fund an AI transformation that will define the next decade. The other sees a capital bonfire, with spending spiraling so fast that Alphabet had to suspend share buybacks for the first time in 33 quarters and raise $49.6 billion through an equity offering in June alone.
Warren Buffett and his successor Greg Abel have placed their bet. Berkshire Hathaway tripled its Alphabet stake in the second quarter, pushing the position to 6 percent of the conglomerate's $263 billion US equity portfolio. Buffett told CNBC he initiated the trade himself, pushing back on suggestions it was solely Abel's call. "I don't do anything he doesn't approve. He doesn't do anything I don't approve. We talk constantly, but he decides," the legendary investor said.
Yet even Buffett sounded cautious about the scale of the AI spending race. "The real question with Google and all its competitors now is: They're all putting hundreds of billions on the table, and that's real money. That's the game they're playing now. With computer software, they didn't play this game," he said.
Should investors sell immediately? Or is it worth buying Alphabet?
The game has become extraordinarily expensive. Alphabet now expects capital expenditures of $195 billion to $205 billion for 2026, roughly $15 billion more than it projected just three months ago. Management flagged another "significant" increase for 2027. In the second quarter alone, capex hit a record $44.9 billion, pushing free cash flow to negative $5.9 billion. The company also issued $20.3 billion in bonds during the same period.
Wall Street punished the stock hard. Shares fell 7.13 percent in a single day, wiping out roughly $293 billion in market value. The relative strength index now sits at 36.2, signaling weak momentum and approaching the oversold threshold that some technicians use as a buy signal.
Analysts have trimmed their price targets but largely maintained their conviction. JPMorgan cut its target to $420 from $460 while keeping an "Overweight" rating, calling the post-earnings selloff a buying opportunity. Pivotal Research went the other direction, raising its target to $475 from $470 with a "Buy" rating. The consensus target of €381.11 implies roughly 33 percent upside from current levels — a gap that will only close if the growth story holds.
The bear case has concrete ammunition too. Beyond the capex explosion, Alphabet has reportedly fallen months behind schedule on its next flagship AI model, Gemini 3.5 Pro, as the company takes extra time to improve its coding capabilities. No new launch date has been set. Moody's warned that the AI buildout is straining free cash flow across major cloud providers and could threaten credit quality at Alphabet and Microsoft, though it noted both remain among the strongest balance sheets globally.
The buyback suspension adds another layer of concern. After repurchasing $13.24 billion in shares during the same quarter last year, Alphabet bought back nothing in the first quarter of this year and repeated that zero in the second quarter. Management also flagged potential margin pressure in the cloud business for the third quarter.
Alphabet at a turning point? This analysis reveals what investors need to know now.
The stock's technical position offers a mixed read. At €285.60, Alphabet trades just 1.65 percent above its 200-day moving average of €280.96, suggesting the recent pullback may be a valuation correction within an intact uptrend rather than a trend reversal. Year to date, the shares remain up 5.61 percent.
The next catalysts are straightforward. An official update on Gemini 3.5 Pro's launch timeline would either defuse or amplify the delay narrative. The coming quarterly report will show whether record infrastructure spending is translating into faster cloud growth — or primarily into rising interest costs and dilution. For now, the bull case rests on a simple proposition: as long as cloud and advertising revenue growth outpaces the capex increases percentage-wise, the consensus target remains within reach. If the cash burn persists without a clear payoff, the bear case around dilution and capital consumption will only strengthen.
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