Terry Smith, the founder and CEO of Fundsmith, is often dubbed the “English Warren Buffett” for his value-oriented investing style focused on high-quality companies with strong returns on capital. In recent quarters, Smith has been on a stock-selling spree, trimming positions in several holdings amid market volatility.
With approximately $17.1 billion in assets under management as of the latest filings, Fundsmith continues to pare back its portfolio to maintain concentration in his top conviction stocks. One notable move was in Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL | GOOGL Price Prediction), where the fund reduced its stake by over 44% in the fourth quarter, selling about 2.8 million shares of the class A stock. But with the stock facing headwinds, should investors follow his lead?
Alphabet’s Hot Streak Ends Abruptly
Alphabet had been dominating the market in early 2026, building on its 66% gain in 2025. However, the momentum reversed following Anthropic’s Jan. 30 announcement of 11 open-source plugins for its Claude Cowork AI platform. This triggered what analysts called the “SaaS-pocalypse,” a broad sell-off in software-as-a-service stocks driven by fears that AI agents could erode traditional SaaS value propositions by automating workflows and reducing the need for human-managed tools.
While SaaS names like Salesforce (NYSE:CRM) and Adobe (NASDAQ:ADBE) were hit hardest, the contagion spread to other tech stocks, including Alphabet. Alphabet’s decline accelerated after its Feb. 4 fourth quarter earnings report, which showed strong results: revenue rose 18% to $113.8 billion, and net income increased 30% to $34.5 billion. Google Cloud revenue surged 48% to $17.7 billion, fueled by AI infrastructure demand.
Despite these positives, the stock dropped sharply due to guidance for 2026 capital expenditures of $175 billion to $185 billion — nearly double the 2025 level — to support AI investments. Investors worried about rising costs and potential margin pressure.
As a result, Alphabet shares fell about 11% in the two weeks following its all-time high of $349 per share. The stock is now down roughly 5% year-to-date as of mid-February, trading around $298 per share.
Timing the Sale: Prescient or Premature?
Smith’s reduction in Alphabet occurred during the stock’s meteoric rise in 2025, when shares climbed from around $243 in September to $313 by year-end. By trimming in the fourth quarter, he locked in gains before the current downturn, appearing prescient amid the AI-driven market shakeup. The SaaS-pocalypse amplified concerns that AI could disrupt Alphabet’s core search and advertising dominance — despite its own massive AI investments — as plugins like those from Anthropic enable more automated, agentic workflows that might bypass traditional interfaces.
Yet, the market — and perhaps Smith — may be overlooking Alphabet’s long-term strengths. The company’s Q4 results highlighted robust growth in AI-powered services, with Google Cloud’s 48% surge reflecting enterprise demand for AI infrastructure and solutions. Alphabet’s massive capex plans signal confidence in capturing AI opportunities, including models like Gemini, which processes over 10 billion tokens per minute. Annual revenues exceeded $400 billion for the first time, with YouTube surpassing $60 billion in ads and subscriptions.
Analysts project 14% revenue growth in 2026, and the stock trades at 30 times forward earnings, reasonable for its scale. While short-term AI fears remain, Alphabet’s ecosystem positions it to benefit from the same trends pressuring SaaS peers.
Key Takeaway
Investors shouldn’t blindly follow any billionaire investor, even one likened to Warren Buffett, as individual strategies and time horizons differ. However, when they make a move — whether it’s a buy or sell — it should prompt a review of your own investment thesis.
Given Alphabet’s strong Q4 performance, AI momentum, and growth trajectory, the recent pullback appears overdone. Alphabet stock is not a sell now; investors should at least hold, and better, view the dip as a potential entry point for long-term appreciation.