At the Berkshire Hathaway (NYSE:BRK.B) annual meeting, CEO Warren Buffett gave his thoughts on artificial intelligence (AI). And the ‘Oracle of Omaha’ is clearly taking it seriously.
Buffett said AI has ‘enormous’ potential, but warned it could be used for good or for evil. And there was one case in particular that stood out as extremely significant.
‘The growth industry of all time’
Buffett raised concerns that the rise of AI might lead to a massive growth in fraud. As he put it:
‘When you think about the potential for scamming people. […] I mean, scamming has always been part of the American scene, but this would make me — if I was interested in investing in scamming — it’s going to be the growth industry of all time, and it’s enabled, in a way [by artificial intelligence].
Warren Buffett — Berkshire Hathaway Annual Shareholder Meeting 2024
In general, Buffett tends to be sceptical of the significance of new technologies – cryptocurrency being an obvious example. But he clearly sees potential in the rise of AI.
Despite this, I don’t think Berkshire’s likely to invest heavily in AI (definitely not through the scamming ‘industry’, but maybe not by any other method either). And the company’s most recent moves support this view.
Investments
Buffett’s latest stock market activity’s very much been away from AI. Berkshire’s been selling part of its stake in Apple – the firm’s most obvious AI investment.
Instead, it’s been focusing on its core competencies. These include Chubb (the Swiss insurance business) and US oil company Occidental Petroleum.
With $277bn in cash and cash equivalents, Berkshire probably has enough to buy both firms outright. But with interest rates in the US still at 20-year highs, I don’t think Buffett’s likely to be in a hurry.
The obvious question is what his next big investment might be. And I’ve one idea, but I don’t think it’s coming from the stock market.
Energy
I suspect there are going to be opportunities for Berkshire in the energy sector. The US is some way off meeting its renewable energy targets for 2050 and there are some clear reasons for this.
So far, investments in wind and solar have been intensive and disappointing. The obvious way to fix this is through some sort of incentive system to help make them more attractive. If this happens, Berkshire should be in a terrific position to benefit. It has the cash on hand to deploy in renewable infrastructure if doing so’s likely to generate reliable returns for the long term.
I think the opportunities here could potentially be huge. Possibly even worth selling a significant stake in Apple for.
Opportunities
Buffett might see the potential in AI. But I expect Berkshire to stick closer to the industries where it already has strong positions in looking for opportunities to deploy its huge cash reserves.
I think there could be such opportunities coming in the energy sector sooner or later. And tBerkshire has the deep pockets to make the kind of investments that other companies or investors just can’t match.
