Berkshire's Abel Bets on AI Power Demand, Warns Housing Faces a "Bumpy Road"

Greg Abel is drawing a straight line between the AI buildout and Berkshire Hathaway's utility business, and the numbers behind that view are starting to firm up. The Berkshire CEO said Wednesday that the conglomerate sees real upside from AI data center construction, a thesis reinforced by Berkshire's decision to make Alphabet its third-largest common stock holding.

Speaking on CNBC, Abel called Alphabet a "significant player" in AI. That assessment, he said, was central to his and Chairman Warren Buffett's decision three months ago to authorize an additional $10 billion investment to help the Google and YouTube parent expand its AI infrastructure. "We are all seeing and feeling the impact" of AI, Abel said.

The scale of that bet is notable. Berkshire ended June with nearly 106 million Alphabet shares worth about $37.8 billion, trailing only Apple and American Express among its equity holdings. Abel took credit for negotiating the fresh investment at a 6.5% discount to Alphabet's stock price, even though Buffett originally initiated the position last year.

Energy as the AI Bottleneck

Abel's more distinctive argument concerns power, not chips. He has long held that energy, not computing capacity, would be the binding constraint on AI's expansion, and he sees that dynamic as a direct opportunity for Berkshire Hathaway Energy.

The evidence is already showing up in Iowa, where the utility is based. Abel estimated that roughly 8% of the unit's load came from data centers last year, a figure that underscores how quickly AI infrastructure is reshaping regional demand. "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."

That view lines up with broader industry signals. Reuters reporting this week noted that Texas regulators have moved to halt powering some data centers, a sign of a national reckoning over what one analysis called "ghost" demand, load that gets promised but never fully materializes on the grid. Separately, coverage of the power and cooling supply chain has highlighted how firms beyond Nvidia are capturing value from the data center boom. Abel's comments suggest Berkshire wants a piece of that infrastructure story through its regulated utility rather than through chipmakers.

The housing side of Berkshire's portfolio tells a very different story. Abel said American consumers remain under pressure from elevated inflation and mortgage rates, and he does not expect quick relief. "We didn't see any sign of immediate recovery," he said. "It was going to be a bumpy road for a while."

That caution is grounded in hard data. U.S. single-family housing starts fell in July to their lowest level since November 2022, according to the Commerce Department's Census Bureau, a decline tied to higher mortgage rates and economic uncertainty stemming 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.

The timing matters for Berkshire's own capital allocation. The company announced its Alphabet stake on June 1, one day after agreeing to pay $6.8 billion for home builder Taylor Morrison, which it now fully owns. Berkshire also holds positions in home builders Lennar and D.R. Horton, giving it a layered bet across the housing value chain even as near-term conditions soften.

Abel remains bullish on the long horizon for that bet. He expects Taylor Morrison to be a "very strong asset" within five to ten years as more Americans pursue homeownership, even if they are hesitant to buy right now. It is a classic Berkshire posture: absorb near-term volatility for a position management believes will compound over a decade or more.

Abel spoke from Tokyo, where Berkshire's Japan strategy continues to deepen. The company holds stakes exceeding 10% in five Japanese trading houses, Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo, and in March took a 2.49% stake in insurer Tokio Marine as part of a strategic partnership. Abel said Berkshire intends to hold the trading house investments for "many decades" and would welcome a transaction with Tokio Marine, though he declined to comment on a published report linking Tokio Marine to potential takeover targets Suncorp and Insurance Australia Group.

The Tokyo trip carried some symbolic weight. Abel traveled there after celebrating Buffett's 96th birthday with the investor and his family, following in the footsteps of a journey Buffett himself once made, most recently in 2023. "Warren absolutely loves the Japanese investments," Abel said. "It wasn't easy for Warren that off I went to Tokyo."

Abel and Buffett jointly manage Berkshire's capital allocation, overseeing a cash position that totaled $364.7 billion as of June 30. That war chest gives the conglomerate flexibility to keep writing large checks, whether into AI infrastructure plays like Alphabet, housing bets like Taylor Morrison, or long-duration positions in Japanese trading houses.

Investment Implications

The read for investors is twofold. Berkshire's energy unit offers a lower-risk, regulated way to participate in AI's power demand story, distinct from the volatility of pure-play AI equities and increasingly relevant given the Texas grid concerns now surfacing in policy circles. The housing bet, by contrast, carries more near-term uncertainty tied to mortgage rates and consumer stress, with Abel himself setting expectations for a multi-year, not immediate, payoff. Watch housing starts data and utility load figures from AI-heavy regions as the clearest signals of whether Abel's thesis is playing out as planned.