Alphabet (NASDAQ:GOOG) might be among the most watched mega-cap tech stocks in the market right now. Between the company’s core search and cloud businesses, its growing bets on AI, and its Waymo self-driving division, there’s no shortage of innovation or growth catalysts that investors can rely on right now as justification for owning this name.
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Berkshire Hathaway recently invested around $4 billion in Alphabet.
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Alphabet TPUs offer a custom, cheaper alternative to Nvidia GPUs for AI workloads.
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Deepseek’s success with lower-cost chips highlights the growing demand for cost-effective AI infrastructure.
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This is something that not only the most passionate growth investors are picking up on, but even some of the most renowned value investors of all time. Warren Buffett and his Berkshire Hathaway (NYSE:BRK-B) recently made a major investment of over $4 billion in Alphabet after seeing what this company can do. And seeing the company’s core search business as the revenue stream that can fund such innovation, as well as a valuation that’s more attractive than most of its mega-cap peers, could bode well for long-term investors. At least Berkshire hopes so.
We’ll have to see how long Berkshire keeps Alphabet in its portfolio. With a new team in place, it’s hard to know whether they will follow Buffett’s investing style for years or decades at a time.
That said, here’s why I think Alphabet could be the long-term holding that investors would do well to hold on to through the market cycles ahead, compared to some of the world’s biggest chip names, including NVIDIA (NASDAQ: NVDA).
Bull vs. Bear Visual
Any sector that grows to scale through a pricing model in which buyers are relatively price insensitive is one that investors want to get into. Nvidia’s ability to charge basically whatever it wants for its high-performance chips has generated astronomical profitability and incredible expectations from investors that this profitability growth can continue for many years to come.
The point is that such profitable opportunities in the market will surely invite competition. Other major players will want to get in on the action, stepping up their own chip development efforts to offer lower-cost or more efficient alternatives.
Alphabet’s internal search for solutions to its own chip demand led the company to produce what it calls its Tensor Processing Units (TPUs). Unlike Nvidia’s GPUs and those produced by some of Nivida’s rivals, these TPUs are application-specific integrated circuits (ASICs) optimized for tensor operations in neural networks. In layman’s terms, this means that these chips can be custom-made for specific enterprise use cases, but more importantly, they can also be used to train AI models and perform inference tasks. That’s a big deal, given all the attention paid to companies in this space.
