Earlier this year, I had trimmed my position in Alphabet for the first time in 15 years as the stock had become an oversized and "overvalued" position in my portfolio...or so I thought. Then Berkshire added significantly to their Alphabet position, and I scratched my head a bit...as I revisited my valuation of the company.

I then recently read the letter from the Bronte Team which believes Alphabet is "abnormally" risky...so I am scratching my head a bit more:

Google’s spending is truly breathtaking: they announced $180-190 billion for 2026 and
guided for a substantial increase in 2027.

The 2026 spend exceeds their cumulative profits over the entire 2010s. Their total AI spend
will be larger than their cumulative profits throughout history.

The whole application of Google’s achievements, at least in a financial sense, has been to
fund a push into AI. Google has even raised cash in 2026.

We repeat: one of the most cash-generative businesses in history has had to raise cash.

What do we think about this?
This presents us with a difficult decision. We love Google as a company and think its
management team may be amongst the best assembled in the history of capitalism.

But the stock is abnormally risky. The core business is being disrupted, and that disruption
may be total.

The company’s reaction is to spend its entire accumulated profits on disrupting itself with
no certainty about the outcome, or even whether there is any profit at the end.

We keep trimming the stock. And we know in the end we will be squeamish about the
outcome. At the one end Google is the provider of the world’s finest superintelligence, and
is the central company in displacing a good slice of the world’s labor (while privatising the
profits). At the other end, the company will have its core business destroyed and will have
wasted all of the money it made during the good years.

We own it. We genuinely have no idea what it is worth. If somebody tells you that they do,
they are pretending to know more about the future than they do about the past or present. (There is much more discussion about Google in the letter, which might have you scratching your head, too ;-)

brontecapital.com - Partners letters