Berkshire Hathaway's (NYSE:BRK.B) recent $10 billion private placement in Alphabet Inc. (NASDAQ:GOOGL) has already turned into a paper loss. Despite negotiating a 6.5% discount on the purchase, Friday's closing prices valued the block at approximately $9.625 billion, a $375 million shortfall from the original cost.
The transaction, detailed in Alphabet's SEC filing, involved the purchase of 14.212 million Class A shares at $351.81 each and 14.360 million Class C shares at $348.20. By Friday's close, those shares had fallen to $338.46 and $335.31 respectively, representing declines of 3.8% and 3.7% from the purchase price.
Greg Abel's Capital Allocation Under Scrutiny
This mark-to-market loss comes just days after Greg Abel, Berkshire's CEO, provided his first detailed account of the company's investment strategy. In a CNBC interview on Wednesday, Abel revealed that Warren Buffett initiated the Alphabet position about 15 months ago, with Abel managing the later block purchase. He personally recommended both the size of the investment and the 6.5% discount before consulting Buffett.
The private placement represents only a fraction of Berkshire's total Alphabet holdings. According to the June 30 holdings report, Berkshire owned 105.98 million Alphabet shares valued at $37.764 billion. At Friday's prices, that entire stake would be worth approximately $35.784 billion, a 5.2% decline from the filing value.
Berkshire Stock Underperforms
Berkshire's own shares have not escaped the broader market's AI-driven volatility. Class B shares closed at $506.03 on Friday, down 0.4% for the day. Over the past month, the stock has fallen 2.5% from its August 5 close of $518.85 and sits 4.4% below its August 10 peak of $529.42. The market appears to treat the Alphabet disclosure as a detail rather than a new earnings driver.
Two AI Bets on Different Timelines
Abel also discussed a second AI-related investment: Berkshire Hathaway Energy's (BHE) contracted data-center demand. The utility group has contracted approximately 11,000 megawatts of data-center load, though only 2,200 megawatts reached peak use last year. BHE projects peak load could reach 4,500 to 5,700 megawatts by 2030.
This utility exposure represents a fundamentally different investment than the Alphabet stake. While listed equities repriced every second, the utility investments require years of construction and regulatory approval. BHE's customers typically take four to eight years to utilize most reserved capacity, making the contracted amount not yet current revenue.
The utility group's second-quarter earnings rose 26.9% year-over-year to $891 million, with U.S. utility earnings up 37.6% to $597 million. However, this growth comes with increased debt and construction risk. BHE had $61.8 billion in borrowings at June 30, and its subsidiaries issued $4.6 billion in term debt during the first half of the year.
Abel emphasized that existing customers should not subsidize hyperscalers, a stance that protects ratepayers but ties project returns to state approvals and enforceable contracts.
Balance Sheet Absorbs the Blow
For Berkshire, the $375 million mark is nearly immaterial relative to its $359.2 billion in cash and Treasury bills. The total Alphabet position equals about 10% of that liquidity base. The larger question is whether Alphabet can convert expensive compute into cash flow, and whether BHE can turn reserved megawatts into approved assets and billed demand.
Wall Street remains optimistic about Berkshire's prospects. UBS analyst Brian Meredith raised his 12-month Class B target to $604 in August, implying 19.4% upside from Friday's close, citing capital deployment opportunities.
The next evidence will come from different sources: daily Alphabet price movements and quarterly utility filings, capital spending reports, and load ramp data. A deeper Alphabet decline would hit reported investment gains, while delayed data centers could strand grid spending. Regulators may also reject contract terms or limit returns.
NYSE trading is closed Monday for Labor Day under the 2026 exchange calendar. Berkshire's next regular session begins Tuesday at 9:30 a.m. EDT.
