Warren Buffett has revealed the background behind Berkshire Hathaway’s astronomical investment in Alphabet, Google’s parent company. He admitted that not having invested in Google sooner was a "mistake" and stressed his positive outlook on the future of the artificial intelligence (AI) race.

On July 18 (local time), in an interview with U.S. business outlet CNBC, Buffett stated, "It was a mistake not to invest in Google just because it is an asset-light business," adding, "Alphabet is a company with a higher likelihood of success than 90–95% of the companies traded on Wall Street."

Warren Buffett, Chairman of Berkshire Hathaway. Photo by AFP Yonhap News

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Buffett’s Berkshire Hathaway currently holds Alphabet shares valued at 31 billion dollars (about 43 trillion won). Of these, 21 billion dollars were purchased on the open market, and just last month, an additional 10 billion dollars was invested through a private placement of new shares. This decision was made to support Google’s expansion of AI investment.

At that time, there was speculation on Wall Street and elsewhere that Berkshire’s large-scale new investment was the first strategic decision by CEO Greg Abel. However, Buffett told CNBC, "This time, I’ll say it. I started it."

He continued, "But we never do anything Greg doesn’t agree with. We discuss things every day, and the final decision is made by Greg."

Buffett drew a clear line regarding the view that Alphabet is now Berkshire’s largest investment destination. He said, "If you only look at listed stocks, that’s how it may appear, but we also value the businesses we wholly own," explaining, "The value of BNSF Railway is far greater than our stake in Alphabet." BNSF Railway is one of America’s largest freight rail companies and is wholly owned by Berkshire Hathaway.

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Buffett said, "Whether we buy listed stocks or acquire an entire company, the evaluation standard is the same. It’s about acquiring a good business at the right price and meeting outstanding management."

Regarding the fierce AI investment race among big tech companies, he commented, "Microsoft, Amazon, and Meta have no other choice. Right now, everyone has to play this game," adding, "If someone can deliver better results for customers, customers will eventually move in that direction."

He also pointed out, "There has never been a case in history where a railroad company has invested 200 to 300 billion dollars. AI is no longer an asset-light business."

Buffett emphasized, "The reason to invest in businesses is that over the long term, they provide much higher returns than government bonds," adding, "A good business generates high returns on capital for a long time, and that’s the standard I use for what makes a company good."