By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
Panelists debate Berkshire's increased Alphabet stake, with some seeing high margins and growth, while others warn of regulatory risks and potential margin compression. The discussion highlights the importance of monitoring Q2-Q3 earnings and antitrust developments.
Risk: Regulatory headwinds and potential margin erosion due to AI costs or forced divestitures.
Opportunity: High-margin growth story driven by ads, Cloud, and AI-enabled services.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
Berkshire Hathaway's new CEO, Greg Abel, made some major moves in his first quarter as the company's leader. He sold off a slew of small positions, including Amazon (NASDAQ: AMZN), concentrating the portfolio in 29 stocks, and he tripled the company's position in Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL).
Is Alphabet a better buy than Amazon today?
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Amazon and Alphabet are two top tech stocks and two of the most valuable companies in the world. Alphabet, though, has skyrocketed over the past five years, and it has the second-highest market cap of any global company, with $4.4 trillion, while Amazon has underperformed the S&P 500.
The companies have many similarities, starting with their varied revenue streams, something Warren Buffett says he looks for in a great company.
Amazon's core segments are e-commerce and cloud computing, but it also has a streaming service, healthcare products, and more.
Alphabet's core product is its search engine, but it also has a formidable cloud business in addition to YouTube, Android, and more.
Both of these companies are leagues ahead of any competition in their main businesses, with strong economic moats.
Let's take a look at how they compare on recent metrics and valuation.
| Metric | Alphabet | Amazon | |---|---|---| | Sales growth | 22% | 17% | | Operating income growth | 30% | 30% | | Operating margin | 36% | 13.4% | | P/E ratio | 27.6 | 28.4 |
From this simple comparison, Alphabet looks like the better buy. It's growing faster, and it's turning more dollars into profits.
But that's not the whole story. Amazon is much bigger than Alphabet; in fact, it's nearly double its size, with $743 billion in trailing-12-month revenue versus $423 billion for Alphabet. Therefore, its 17% growth is much more in absolute terms and a very impressive showing.
The operating margin is lower because Amazon deals with e-commerce and sells actual products, while Alphabet is mostly a services company. Wider margins are a good reason to own tech stocks, but it doesn't necessarily point to a better-run organization. Amazon Web Services (AWS) itself had a 38% operating margin, while Google Cloud's was 33%.
Personally, I find this a tough call, even though Abel clearly doesn't. These are both terrific powerhouses with tons of long-term opportunity.
Alphabet stock has been trading at a lower P/E ratio for most of the year, which might be why it looks like the better buy. It also has the top position in several industries, including an unparalleled lead in search at about 90%. Even Amazon doesn't have that in e-commerce. And while AWS is still the leader in cloud, Google Cloud is growing faster, at 63% in the first quarter versus 28% for AWS. While in absolute terms AWS brought more in, the growth potential is compelling.
Alphabet does look like the better buy today, although keep in mind that a $337 billion portfolio looks different than yours, and Amazon is still an excellent pick.
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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Berkshire Hathaway. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"Berkshire’s Alphabet bet reflects a belief in a durable, high-margin AI-enabled platform moat, but ad-cycle and regulatory risks could cap upside and make the concentration risky."
Berkshire’s Abel appears to tilt the book toward Alphabet, signaling conviction in a high-margin, platform-based growth story driven by ads, Cloud, and AI-enabled services. Alphabet’s growth and margins look appealing relative to Amazon, yet the move glosses over risk: Alphabet is heavily ad-reliant and exposed to regulatory scrutiny, and Berkshire’s stake is now more concentrated in one mega-cap, reducing diversification. If ad markets soften or antitrust actions bite, multiple compression is possible even if earnings beat. Amazon still offers recession-resilient e-commerce and AWS upside; Berkshire may be under-earning by leaning into Alphabet at current levels.
It might be a rebalancing play rather than a durable conviction in Alphabet, and Alphabet’s ad-reliant model plus regulatory risk could cap upside; Amazon could surprise to the upside with e-commerce and AWS, making Berkshire’s concentration risky.
"Alphabet's valuation is currently tethered to regulatory outcomes that could dismantle its high-margin search business, rendering simple P/E comparisons insufficient for long-term risk assessment."
The narrative that Greg Abel is 'loading up' on Alphabet ignores the reality of Berkshire’s capital allocation strategy. Berkshire’s portfolio is constrained by size; a 'tripled' position in Alphabet likely represents a rounding error in the context of their massive cash pile, rather than a fundamental shift in thesis. The article also glosses over the regulatory risks; Alphabet is currently fighting existential antitrust battles in both the U.S. and EU regarding its search monopoly. While the 36% operating margin is superior to Amazon’s 13.4%, it is vulnerable to forced divestitures or changes to ad-tech business models. Investors should focus on the regulatory ceiling rather than just the P/E expansion.
If Alphabet’s AI integration effectively defends its search moat against LLM-based competitors, the current P/E of ~27x is a significant discount for a company with such dominant cash flow generation.
"The article mistakes portfolio rebalancing for fundamental superiority; both stocks are fairly valued for their respective risk/reward profiles, and the choice depends entirely on whether you believe AI monetization (Alphabet) or cloud infrastructure durability (Amazon) compounds faster over 10 years."
The article conflates portfolio concentration with investment merit. Abel tripling Alphabet while exiting Amazon tells us about Berkshire's capital allocation, not necessarily which stock is 'better.' The comparison is superficial: identical P/E ratios mask that Alphabet trades on margin expansion and AI optionality, while Amazon's 13.4% operating margin reflects deliberate reinvestment into AWS and logistics—not operational weakness. The article ignores that Amazon's $743B revenue base growing 17% in absolute dollars ($126B annually) dwarfs Alphabet's absolute growth. Also unmentioned: Alphabet faces regulatory headwinds on search dominance; Amazon's cloud moat is arguably deeper despite slower growth rates.
If Abel—arguably the most capital-disciplined operator in tech—is rotating out of Amazon into Alphabet, that's a signal worth respecting regardless of the article's framing. Alphabet's 36% operating margin and 22% sales growth at scale is genuinely rare; Amazon's margin profile may not improve materially.
"Berkshire's move highlights margin appeal but ignores Alphabet's elevated regulatory and AI-disruption risks versus Amazon's scale."
Berkshire's tripling of Alphabet while exiting Amazon signals a preference for higher-margin search dominance and faster cloud growth at Google Cloud (63% vs AWS 28%). Yet the article underplays Alphabet's $337B portfolio context: concentrated bets in 29 names amplify single-stock risk, especially with AI search disruption threats and ongoing antitrust scrutiny that could force structural changes. Amazon's absolute revenue scale ($743B TTM) still generates larger dollar growth despite lower percentages, and AWS margins near 38% suggest the e-commerce drag is transitional rather than structural. Valuation similarity at ~28x P/E masks differing durability of moats under regulatory pressure.
Alphabet's 90% search share invites faster regulatory remedies than Amazon's fragmented e-commerce position, potentially capping upside more than the article acknowledges.
"Regulatory and privacy headwinds could erode Alphabet's ad monetization and delay AI-driven margin expansion, making Berkshire's Alphabet exposure riskier than the article implies."
Grok, good read on AWS margins, but your focus on Alphabet's moat misses a larger risk: regulatory and privacy headwinds can erode ad targeting efficiency and ARPU faster than anticipated, which would compress margins and push AI monetization timelines out. Berkshire's big bet on Alphabet becomes an outsized bet on a single stock's fate; if antitrust outcomes force structural changes or forced divestitures, the portfolio's risk/return could deteriorate much more quickly than the article implies.
"The structural increase in AI-driven search query costs poses a greater threat to Alphabet's margins than regulatory antitrust actions."
Gemini, your 'rounding error' dismissal is historically illiterate regarding Berkshire’s playbook. Buffett and Abel don't triple positions in mega-caps for 'rounding errors'; they do it when they see a mispricing of free cash flow durability. The real risk, which everyone is missing, is the 'AI tax' on Google’s search margins. If LLM-based search query costs are structurally higher than traditional indexing, Alphabet’s 36% margin is a decaying asset, regardless of regulatory outcomes.
"Query volume risk > margin compression risk in the near term, and current valuation reflects near-term durability, not long-term structural decay."
ChatGPT's 'AI tax' framing is speculative—Google's inference costs are real but modest relative to query value. The actual risk is query volume collapse if LLMs cannibalize search demand itself. But nobody's addressed the timing: even if that happens, it's 3–5 years out. Berkshire's 28x multiple prices in near-term margin durability, not perpetual 36% EBITDA. The real question is whether Q2–Q3 earnings confirm margin hold or show early compression. That's the regulatory-independent signal everyone should watch.
"Antitrust timelines pose a more immediate threat to Alphabet's margins than earnings prints reveal."
Claude's emphasis on Q2-Q3 earnings as the regulatory-independent signal underplays the DOJ antitrust timeline, where remedies could hit search monetization by late 2025 regardless of margins. This connects directly to Gemini's AI tax concern: higher inference costs plus potential forced data sharing would erode Alphabet's 36% operating margin faster than Amazon's AWS trajectory, making the rotation riskier than Abel's capital discipline suggests.
Panelists debate Berkshire's increased Alphabet stake, with some seeing high margins and growth, while others warn of regulatory risks and potential margin compression. The discussion highlights the importance of monitoring Q2-Q3 earnings and antitrust developments.
High-margin growth story driven by ads, Cloud, and AI-enabled services.
Regulatory headwinds and potential margin erosion due to AI costs or forced divestitures.