Key Points
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Warren Buffett retired on Dec. 31, passing oversight of Berkshire’s vaunted investment portfolio to Greg Abel.
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The Oracle of Omaha’s understudy has decisively put tech stocks on the menu.
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Since taking the helm, Abel has piled into two AI-driven businesses.
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This has been a year of immense change for Berkshire Hathaway (NYSE:BRKA)(NYSE:BRKB) and its investors. After more than half a century at the helm, the iconic Warren Buffett retired as CEO on Dec. 31, paving the way for Greg Abel to take over.
It took Abel mere months to completely reshape Berkshire’s $364 billion portfolio. He dumped 16 stocks in the first quarter and has brought a tech focus to the company’s investment portfolio that hadn’t existed under the Oracle of Omaha. Today, three unstoppable artificial intelligence (AI) stocks account for roughly 32% ($115.7 billion) of Berkshire’s portfolio: Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOGL)(NASDAQ:GOOG), and Bending Spoons (NASDAQ:BSP).
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Warren Buffett’s Dec. 31 retirement turned the proverbial keys over to Greg Abel. Image source: Getty Images.
Apple: $78.28 billion (21.5% of invested assets)
For the better part of the last decade, Apple has been Berkshire’s top holding by market value. Warren Buffett piled into Apple because he appreciated the brand’s loyal customer base and favored the company’s market-leading share buyback program.
But Apple is in the midst of a multi-year transformation that emphasizes higher-margin subscription services and AI. Prior to his own recent retirement as CEO, Tim Cook shifted Apple’s focus to services designed to enhance existing customer loyalty and bolster margins. Double-digit sales growth in the company’s services segment should lessen the revenue peaks and valleys commonly seen with major iPhone upgrade cycles.
There’s also Apple Intelligence, which is the company’s generative AI built directly into its operating systems. Embracing these tools should make its physical devices (iPhone, Mac, and iPad) considerably more attractive.
Alphabet: $36 billion (9.9% of invested assets, both share classes combined)
Perhaps the biggest change in the wake of Buffett’s retirement has been Abel’s aggressive purchases of Google parent Alphabet. Though Buffett initiated this position before his retirement, Abel more than tripled it in the first quarter and purchased around $17 billion in additional stock in the second quarter.
Alphabet possesses the sustainable moat that Berkshire’s current and former bosses often seek out. In September, Google accounted for 90% of global internet search traffic. Maintaining a virtual monopoly in internet search affords the company exceptional ad-pricing power.
But it’s Alphabet’s AI ambitions that are really turning heads. Since Alphabet began integrating generative AI and large language model capabilities into Google Cloud, sales for this significantly higher-margin operating segment have soared. In the June-ended quarter, Google Cloud’s year-over-year revenue growth accelerated to 82%!
Image source: Getty Images.
Bending Spoons: $1.44 billion (0.4% of invested assets)
The third unstoppable AI stock that, alongside Apple and Alphabet, collectively makes up 32% of Berkshire Hathaway’s $364 billion investment portfolio is the Italian-based tech- and AI-focused acquisition company Bending Spoons.
Last week, Berkshire Hathaway worked out a deal to acquire an additional 10 million shares of Bending Spoons via a private placement at $33 per share. This comes atop Berkshire’s initial investment at the company’s July initial public offering.
Bending Spoons has acquired several mature tech and digital businesses, including AOL and Vimeo. It develops software and relies on AI, among other factors, to make these businesses more efficient and generate sustainable subscription sales. It’s a relatively low-cost/high-margin operating model that’s now well-funded, thanks in part to Warren Buffett’s successor.
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Sean Williams has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Apple, and Berkshire Hathaway. The Motley Fool has a disclosure policy.
