Berkshire Hathaway shares surged this week, outperforming a sliding S&P 500 index, as investors moved money away from slumping technology stocks.
Berkshire's Class B shares rose more than 5% this week while the S&P 500 fell almost 2.7%. The contrast is sharper against the Nasdaq Composite, which fell 3.4% and entered correction territory, more than 10% below its most recent high, before recovering some ground on Friday.
Investors moved money away from slumping tech stocks amid fears that massive spending on AI data centers will not pay off. Berkshire has relatively little exposure to artificial intelligence and appeared to offer relative safety.
The move marks a reversal from one month ago, when Berkshire's B shares were underperforming the S&P by 13.6 percentage points for the year. After three more record-high closes this week, Berkshire now leads the benchmark by 5.8 percentage points.
Berkshire is not completely removed from the AI sell-off. Its large stake in Alphabet, the Google parent, has slid along with other AI-related stocks. As of June 30, Berkshire held about 106 million shares of Alphabet, with a market value of $37.8 billion. Since then, both share classes have dropped around 20%, reducing the stake to about $30.2 billion and dropping it behind Coca-Cola as Berkshire's fourth-largest holding.
Bloomberg suggested that “with cracks in the AI trade starting to show, Berkshire's sudden push [into AI] may appear ill-timed.” CFRA Research analyst Cathy Seifert said part of the move may be a conscious decision to increase Berkshire's exposure and asked whether it was “a little late.” However, Keefe Bruyette & Woods analyst Meyer Shields said Abel probably sees bets on AI as a long-term wager on the technology's potential, in keeping with the “conservatism that you would expect at Berkshire Hathaway.”
Barron's Andrew Bary estimated a $3 billion loss on Alphabet as part of a “disappointing” trend in Berkshire's stock picks, noting that “the company hasn't created much value from stock picking during the current decade” even as the S&P 500 has returned 150% since the end of 2019. Bary concluded that “barring a market rout, equity investing may not be central to Berkshire anymore.”
In other Berkshire news, the company disclosed a small $27 million addition to its $4.1 billion Sirius XM position, helping push the satellite radio stock to a 52-week high. Pacific Power, a unit of Berkshire Hathaway's PacifiCorp, is asking California regulators for a 57% rate increase, which the Wall Street Journal called a “stunning request.” The utility faces around $637 million in liability claims for wildfires in 2020 and 2022.
Analysis
Why This Matters
- Berkshire's outperformance signals a shift in investor sentiment away from AI-heavy tech stocks toward traditional value.
- The rotation may reflect doubts about whether massive AI spending will generate near-term returns.
- Berkshire's Alphabet stake decline and the PacifiCorp rate case highlight risks in the conglomerate's portfolio.
Background
Berkshire Hathaway, led by Warren Buffett until his planned retirement at end of 2025, is a conglomerate with holdings in insurance, railroads, energy, and consumer goods. Buffett has long been cautious on technology, but Berkshire began building a large Alphabet position in 2023. The current market turbulence has reversed Berkshire's earlier underperformance, though its tech bets face scrutiny.
Key Perspectives
CFRA Research analyst Cathy Seifert: Questions whether Berkshire's increased Alphabet exposure is "a little late."
Keefe Bruyette & Woods analyst Meyer Shields: Sees the bets as a long-term wager on AI's potential, consistent with Berkshire's conservatism.
Barron's Andrew Bary: Calls Berkshire's stock picks "disappointing" and says equity investing may not be central to Berkshire under new CEO Greg Abel.
What to Watch
- Berkshire's Q3 13F filing, due around mid-November, will show whether it adjusted its Alphabet position.
- The PacifiCorp rate case in California and ongoing wildfire liability appeals in Oregon.
- Continued investor rotation from tech to traditional sectors and its impact on Berkshire's share price.
Checked
12 claims in this story checked against 1 source: 12 supported.
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- SupportedInvestors moved money away from technology stocks amid fears that AI data-centre spending would not pay off.US Top News and Analysis: “as investors moved money away from slumping tech stocks and moved into what appears to be the relative safety of a traditional conglomerate with relatively little exposure to artificial intelligence amid fears massive spending on data centers won't pay off”
- SupportedBerkshire outperformed the S&P 500 while the Nasdaq entered correction territory.US Top News and Analysis: “Berkshire Hathaway shares roared past the S&P 500 index this week”
- SupportedBerkshire's B shares rose more than 5% this week while the S&P 500 fell almost 2.7%.US Top News and Analysis: “Berkshire was up more than 5% this week while the S&P fell almost 2.7%.”
- SupportedThe Nasdaq fell 3.4%, dropped more than 10% below its recent high and recovered some ground on Friday.US Top News and Analysis: “the Nasdaq Composite, which fell 3.4% on the week. Thursday's especially heavy tech selling pushed the index down more than 10% below its most recent high in what is commonly referred to as a "correction," but it did make up some of its lost ground Friday.”
- SupportedBerkshire went from underperforming the S&P by 13.6 percentage points a month earlier to leading it by 5.8 points.US Top News and Analysis: “One month ago, Berkshire's widely held B shares were underperforming the S&P by 13.6 percentage points for the year. With help from three more record-high closes this week, Berkshire is now 5.8 percentage points ahead of the benchmark.”
- SupportedSince June 30, Alphabet's share classes have fallen around 20%, reducing Berkshire's stake from $37.8 billion to $30.2 billion and making it the portfolio's fourth-largest holding.US Top News and Analysis: “On June 30, the position had a market value of $37.8 billion and it was the third largest equity holding in Berkshire's portfolio. Since then both the Class A and Class C shares have dropped by around 20% and the stake is now valued at $30.2 billion, falling behind Coca-Cola's $38.3 billion to the portfolio's #4 position.”
- SupportedBloomberg suggested Berkshire's push into AI might appear ill-timed as cracks in the AI trade showed.US Top News and Analysis: “Bloomberg suggests that "with cracks in the AI trade starting to show, Berkshire's sudden push [into AI] may appear ill-timed."”
- SupportedCFRA Research analyst Cathy Seifert said the move might be a conscious effort to increase exposure and asked whether it was “a little late.”US Top News and Analysis: “Bloomberg quotes CFRA Research analyst Cathy Seifert as saying, "I do think that part of this may be a conscious decision to increase their exposure. One has to ask the question though, is it a little late?"”
- SupportedMeyer Shields said Abel probably viewed AI bets as a long-term wager on the technology, consistent with Berkshire's expected conservatism.US Top News and Analysis: “Keefe Bruyette & Woods analyst Meyer Shields saying Abel probably sees bets on AI as a long-term wager on the technology's potential, in keeping with the "conservatism that you would expect at Berkshire Hathaway."”
- SupportedAndrew Bary estimated a $3 billion Alphabet loss and said Berkshire had created little value from stock picking this decade, while the S&P 500 had returned 150% since the end of 2019.US Top News and Analysis: “Andrew Bary sees what he estimates is a $3 billion loss on Alphabet as part of a "disappointing" long-term trend in Berkshire's stock choices "The company hasn't created much value from stock picking during the current decade" even though the "S&P 500 has returned 150% since the end of 2019”
- SupportedBerkshire disclosed a $27 million addition to its $4.1 billion Sirius XM position, helping fuel a rally that took the stock to a 52-week high.US Top News and Analysis: “Berkshire Hathaway's disclosure that it had made a relatively small $27 million addition to its $4.1 billion Sirius XM position helped fuel an ongoing rally that lifted the satellite radio company's shares to a 52-week high this week.”
- SupportedPacific Power sought a 57% rate increase, which the Wall Street Journal called a “stunning request”; the utility faced around $637 million in liability claims for fires in 2020 and 2022.US Top News and Analysis: “Pacific Power, a unit of Berkshire Hathaway's PacifiCorp, is asking California regulators for a 57% rate increase that would raise the typical residential electric bill by $120 a month. The Wall Street Journal calls it a "stunning request even in an era of rising electricity costs."”
