Alphabet Powers Giverny Capital's 2025 Gains, But Fund Lags Behind S&P 500
Giverny Capital Asset Management closed the books on a turbulent 2025, revealing in its year-end investor letter that while tech giant Alphabet Inc. (GOOG) was a bright spot, its overall performance struggled to keep pace with the surging market.
The firm's portfolio eked out a mere 0.01% gain in the fourth quarter, dramatically underperforming the S&P 500's 2.66% rise. For the full year, Giverny's 12.58% return fell short of the index's 17.88% climb. The letter pointed to a "challenging" environment where the staggering outperformance of a handful of mega-cap technology companies—a sector where Giverny is deliberately underweight—dampened results. Instead, the firm maintains heavier bets on smaller, niche industry leaders.
"Our companies are delivering exceptional earnings growth and shareholder returns," the letter stated, "but the market's singular focus on AI narratives has created a disconnect from fundamental business performance."
Alphabet emerged as a key contributor, accounting for 4.7% of the fund's 2025 growth. The Google parent company's shares gained 7.4% in the final month of the quarter, capping a 52-week surge of over 64%. The stock closed January 29, 2026, at $338.66, solidifying its position with a market cap exceeding $4 trillion. Alphabet's milestone achievement of $100 billion in quarterly revenue in Q3 2025 underscored its financial heft.
Nevertheless, Giverny's commentary struck a cautious note on the AI-fueled rally. While acknowledging Alphabet's strength, the firm suggested that other AI-related equities might offer "greater upside potential with less downside risk" in the current climate.
Investor Reactions:
"This report validates a disciplined, fundamentals-first approach," said Michael Thorne, a portfolio manager at a rival firm. "Giverny is playing the long game. When the AI hype cycle cools, their picks in industrial and consumer niches will shine."
"It's a textbook case of stubbornness costing returns," argued Sarah Chen, an independent retail investor, her tone sharper. "Why fight the dominant market trend? Being underweight the very sector driving all the growth isn't a strategy—it's an excuse for underperformance. Investors aren't paying fees to trail the index."
"The nuanced take on Alphabet is interesting," noted David Reeves, a financial analyst. "They own it and it helped them, yet they're signaling it might be overvalued relative to other AI plays. It shows active management is alive, even if it's having a tough year."
The letter concluded by directing investors to the fund's top holdings for 2025 and related research, maintaining a forward-looking stance despite the recent headwinds.