Berkshire Hathaway stock has reclaimed its reputation as a defensive holding as the AI trade loses momentum. The Class B shares have gained 13.6% this year, outpacing the S&P 500’s 7.8% advance, even though the conglomerate had trailed the broader market since Warren Buffett announced he would step down as CEO last year. The shift has accelerated since October began: Berkshire has climbed 14%, while the S&P 500 has slipped about 4%.
The pattern echoes earlier periods of market stress. In 2022, when the Federal Reserve’s aggressive rate hikes drove the broad index down 18%, Berkshire still managed a 4% gain. Investors now appear to be treating the company as a shelter while they rotate away from the high-flying technology names that benefited most from the AI boom.
Portfolio Not Immune to Market Swings
Berkshire’s own investment results have not escaped the turbulence. Its third-quarter earnings report, filed Saturday, showed investment gains fell 46% from a year earlier to $9.4 billion. The company’s largest stock holdings remained Alphabet, American Express, Apple, Bank of America and Coca-Cola during the quarter. A more detailed filing later this month is expected to disclose the precise portfolio moves.
The quarterly report did show that Berkshire bought $2.4 billion of stocks and sold about $2.8 billion. On a cost basis, it increased its stake in “commercial, industrial, and other” equities by $2.3 billion and reduced its position in “banks, insurance and finance” by $400 million.
Abel Accelerates Buybacks and Draws Down Cash
Greg Abel, who succeeded Buffett as CEO at the start of this year, has continued to deploy Berkshire’s large cash reserve and has sped up stock repurchases. The company bought back $9.6 billion of its own shares in the third quarter, more than double the second-quarter pace. In the first four weeks of the fourth quarter, it repurchased roughly $2 billion more.
Berkshire’s collection of businesses remains weighted toward traditional industries such as the BNSF railroad, Brooks running shoes, See’s candies and Forest River recreational vehicles. Abel added to that focus in July by agreeing to acquire home builder Taylor Morrison for $6.8 billion. The deal ended a long stretch without a major purchase, a period during which Buffett had complained about a lack of attractive bargains.
Traditional Operations Deliver While Insurance Slips
Those traditional holdings have continued to produce results. In the third quarter, Berkshire’s railroad, energy and manufacturing businesses reported strong profits, though insurance underwriting fell sharply.
The AI boom has lifted not only technology companies but also industries tied to the hundreds of billions of dollars being spent on data center construction and electrical grid upgrades. U.S. gross domestic product expanded 3.4% in the third quarter, up from 2.2% in the second quarter. However, Democratic victories in gubernatorial races in data center hot spots such as Texas, Ohio and Georgia are expected to slow the AI buildout and the broader economy.
