Thousands of people quietly travel to Omaha, Nebraska, each year for the Berkshire Hathaway annual meeting. They enter the CHI Health Center arena with their branded tote bags, purchase See’s Candy and Brooks Running shoes in the exhibition hall, and take their seats to listen to Warren Buffett speak. For many years, the ritual resembled a type of secular church, with people congregating around a guy whose investment philosophy seemed to defy every Wall Street bubble and trend. Therefore, Buffett’s recent statement that he now knows a smaller percentage of the companies he owns than he did ten years ago has real significance. False modesty is not what that is. That’s a statement about how much his surroundings have changed.
In the first quarter under Greg Abel’s management of the Berkshire Hathaway AI stock portfolio, three AI-related stocks accounted for 28% of invested assets. With 21.4% of the whole portfolio, Apple is the biggest of those. Just that number is worth stopping to consider. It is not a coincidence that a firm that was founded on industry diversification—including insurance, railroads, electricity, sweets, and furniture—has more than a fifth of its ownership invested in a single technological company.
Buffett has stated unequivocally, “I’m very happy to have it be our largest holding.” People are beginning to wonder if that comfort stems from Apple’s core values or from an unconscious wager on the potential impact of artificial intelligence on consumer hardware and service sales.
According to reports, Apple is working on a redesigned Siri that will be more powerful, conversational, and integrated into the device experience. For a company that has spent years attempting to lessen its reliance on iPhone unit sales alone, a better Siri means more people using Apple services, which means services revenue grows faster. This is why the investment community has been closely monitoring that development.
The numbers usually follow when a significant AI upgrade is integrated into the operating system of a large-cap incumbent with over a billion active devices in people’s pockets. Even if neither would characterize it that way, it’s plausible that Buffett and Abel are placing bets on precisely that sequence of events.
Greg Abel’s position is very unique. He is taking over one of the most meticulously built and closely monitored investment portfolios in history at a time when the underlying logic of that portfolio—purchasing businesses with long-lasting competitive advantages and holding them for decades—is plunging headlong into a time when artificial intelligence is rearranging competitive advantages more quickly than any other technological cycle.
Instead of aiming for pure AI plays that it doesn’t comprehend, Berkshire seems to be managing this shift by remaining close to businesses that it already knows. Depending on how the next five years play out, that might be either conservative or disciplined. Which is yet unknown.
As the Berkshire Hathaway AI stock portfolio changes under the new management, it’s important to note a more general point. At a company that has historically been allergic to technology concentration, the fact that three AI-linked stocks now make up 28% of invested assets indicates where the market’s gravity has changed. Berkshire isn’t following a fad here. Berkshire is being dragged along by one and has decided to follow the stream rather than defy it, at least for the time being.
