By Jonathan Stempel
NEW YORK, Sept 2 (Reuters) – Berkshire Hathaway CEO Greg Abel said on Wednesday he sees significant opportunities for the conglomerate from the buildout of AI data centers, after Berkshire made Alphabet its third-largest common stock holding.
Abel separately said American consumers remain under stress from elevated inflation and mortgage rates, and that the housing market will be a “bumpy road” in the near term.
Speaking on CNBC, Abel called Alphabet a “significant player” in AI, a factor that prompted him and Berkshire Chairman Warren Buffett to authorize an additional $10 billion investment three months ago to help the Google and YouTube parent build out AI infrastructure.
“We are all seeing and feeling the impact” of AI, Abel said.
Berkshire ended June with nearly 106 million Alphabet shares worth about $37.8 billion. Its largest stock investments were Apple and American Express.
Abel said Berkshire’s energy business could also benefit from AI growth, reflecting the growing amount of electricity needed to run data centers.
He estimated that in Iowa, where Berkshire Hathaway Energy is based, about 8% of its load came from data centers last year.
“I’ve sort of always had the strong view that energy would be the constraint,” Abel said. “We do still see it as a significant opportunity for Berkshire and Berkshire Hathaway Energy.”
Buffett initiated Berkshire’s investment in Alphabet last year, though Abel took credit for making the new investment at a 6.5% discount to Alphabet’s stock price.
Abel, with help from Buffett, allocates Berkshire’s capital and manages its cash stake, which totaled $364.7 billion as of June 30.
ABEL SAYS CONSUMERS ARE STRETCHED
Berkshire announced the Alphabet investment on June 1, one day after agreeing to pay $6.8 billion for the home builder Taylor Morrison, which it now owns. It also invests in the home builders Lennar and D.R. Horton.
Abel expects Taylor Morrison to be a “very strong asset” in five to 10 years as more people pursue homeownership, even if they hesitate in the near term.
“We didn’t see any sign of immediate recovery” in housing, Abel said. “It was going to be a bumpy road for a while.”
U.S. single-family housing starts, which account for the bulk of homebuilding, fell in July to their lowest since November 2022, according to the Department of Commerce’s Census Bureau, reflecting higher mortgage rates and economic uncertainty from the Iran war.
“There’s a consumer that is still clearly feeling the pain, and struggling, and having to stretch a lot further with that dollar,” Abel said.
ABEL, BUFFETT LIKE JAPANESE INVESTMENTS
Abel spoke from Tokyo, where he said Berkshire has more than 10% stakes in Japanese trading houses Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo, and in March took a 2.49% stake in the insurer Tokio Marine as part of a strategic partnership.
Berkshire plans to hold its trading house investments for “many decades” and would love to pursue a transaction with Tokio Marine, Abel said.
He declined to comment on a published report about Australian insurer Suncorp and Insurance Australia Group as possible Tokio Marine takeover targets.
Abel flew to Tokyo after celebrating Buffett’s 96th birthday on Sunday with the legendary investor and his family. It was a trip Buffett would once make himself; he visited Japan in 2023.
“Warren absolutely loves the Japanese investments,” Abel said. “It wasn’t easy for Warren that off I went to Tokyo.”
Berkshire’s dozens of businesses include the BNSF railroad, Geico car insurance, manufacturing companies and retail brands such as Brooks, Dairy Queen, Fruit of the Loom and See’s.
(Reporting by Jonathan Stempel in New York; Editing by Kirsten Donovan and Jan Harvey)
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