Why Berkshire Hathaway Looks Likely to Invest in More Artificial Intelligence (AI) Stocks

BRK-B -0.41% GOOG -1.11% A couple of years ago, when artificial intelligence (AI) chatbots were in their early stages of development, Berkshire Hathaway (NYSE:BRKA)(NYSE:BRKB) wasn't jumping aboard the craze. Warren Buffett, the CEO at the time, takes a very methodical and practical approach to investing, centered on businesses and industries he knows very well. Investing in AI stocks, particularly in their early innings, is not something many investors would have expected from the Oracle of Omaha.

What was surprising, however, was when Buffett revealed he initiated Berkshire's position in tech company Alphabet last year. While Alphabet isn't just an AI stock but a behemoth in the tech sector, it was symbolic of perhaps greater interest in emerging technologies. Under new CEO Greg Abel, the company may become even more aggressive in pursuing top AI stocks. Here's why.

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Berkshire invests in and owns many different types of businesses. Having exposure to different sectors of the economy enable it to get a broad overview of how AI is affecting many types of businesses. And the insights it has gained amid that gave the company the confidence to invest in a big tech giant. "We have a lot of visibility from within our companies as to how we're using AI, what type of benefits it's delivering, so that brought incremental interest, and then we saw Google as a significant player," Abel stated in a recent interview with CNBC.

Alphabet owns Google, and the business has benefited from AI's growth in multiple ways, not only revamping its search engine but also developing its own chatbot, Gemini, along the way. Alphabet is an early leader in the space. Abel, however, may end up considering other tech companies as well, which are in excellent positions to take advantage of AI-related opportunities. Some obvious examples here include Microsoft and Nvidia.

At the very least, investors shouldn't be surprised if there are more AI stocks that find their way into Berkshire's portfolio in the near future.

In the past 12 months, Berkshire's stock has generated flat returns. It also trades at 13 times earnings, which is the multiple investors might expect for a slow-growing business. If, however, Abel does take a more aggressive approach toward AI, that could lead to greater excitement around the business, potentially attracting a younger group of investors, and it may also result in the stock trading at a higher premium.

AI is an intriguing area for Berkshire to focus on, with ample opportunities for the business and many high-quality tech stocks it could add to its portfolio in the near future. Now may be a great time to buy shares of Berkshire Hathaway.

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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Berkshire Hathaway, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

Why Berkshire Hathaway Looks Likely to Invest in More Artificial Intelligence (AI) Stocks was originally published by The Motley Fool