Beyond Buffett: How Berkshire Hathaway Plans for a Tech-Driven Future

TradingKey - Warren Buffett's tenure at Berkshire Hathaway (BRKa, BRKb) will come to an end in 2025, marking the end of a remarkable period during which he built the company from nothing to a $1 trillion business and changed the investment industry forever. 

Many investors are wondering if the gap between Berkshire's current share price and its projected future value should be a concern for their portfolios in 2026, as both BRK Class A and B shares will be entering into a post-Buffett era.

Reasons Buffett Stocks Lag in Hype Markets

Berkshire Hathaway is built for Long-lasting Performance rather than immediate Fast Growth; it will often lag behind Companies & Industries when the market has fallen in "Love" w/ Theme; Example: this cycle (AI). 

This was also seen during the Recovery from the Financial Crisis (2008), the Dot-Com Bubble Peak, and the 1975 Post-Recession Recovery. 

This Profile is conducive to a Company that values Cash Generation via Resilient Business Models over Momentum from Storytelling; therefore, it would be expected for short-term performance to be Arm-in-Arm with Long Term Performance in the Warren Buffett Portfolio.

Berkshire's Historic Outperformance

Berkshire Hathaway has had an annual underperformance against the S&P 500 just 20 times since 1965, but has had total returns year-to-date from 1965 to 2024 totaling in excess of 5,500,000%; in contrast, the S&P 500's returns have been approximately 39,000% over the same period. 

When expressed as an annualized rate of return, Berkshire's return is 19.9%, compared to 10.4% for the S&P 500. The S&P 500 performance includes dividends, whereas Berkshire does not pay any dividends, further demonstrating the difference in Berkshire's continued ability to compound.

Berkshire’s Strength After Buffett

There is no basis to be concerned about Berkshire Hathaway's value in the next five years. The world economy will impact how BHB performs; however, this condition does not affect the fundamental functions of Buffett and his management.

Berkshire's foundation is its physical operations, and in turn, creates cash flows regardless of whether these operations rise or fall, depending on investor perceptions.

Berkshire Hathaway also has a large insurance operation (e.g., GEICO, National Indemnity), and it operates a large railway, the BNSF railway, and a large utility/energy company; collectively, these companies provide Berkshire with an ongoing supply of cash that contributes to its financials and impacts how it will perform in the future.

Lastly, Berkshire claims to generate approximately ($33 Billion) in cash flows annually from its operations and to have cash flows from its Investment Portfolio to continue to grow indefinitely.

Greg Abel’s Leadership and Cash Strategy

It has taken a while to develop the succession plan for leadership transition. Greg Abel was selected personally to take on the role of CEO by Warren Buffett himself, which carries weight in terms of public perception—if he was good enough for Warren, he's likely deserving of your patience as an investor too. 

As part of his succession plan, he will also inherit a robust balance sheet from Warren and Berkshire Hathaway Inc., with over $72 billion of cash/cash equivalents on the balance sheet and over $305 billion in U.S. Treasury Bills as of the end of Q3— a grand total of almost $377 billion or approximately to $380 billion in cash and liquid balance sheet investment securities combined. 

This record amount of cash reflects that Berkshire has been a net seller of equities the past couple of years; therefore, having it positioned and ready-to-use will serve as a safety net while keeping options open for "home-run" investments when prices & probabilitys are aligned.

AI Focus: Alphabet and Amazon in Berkshire

While Buffett may have decreased his involvement in the daily running of Berkshire Hathaway, examining his investment portfolio continues to offer some insights into how he invests and chooses investments. 

A key tenet of Buffett’s philosophy has been to invest in companies with which he is familiar, taking advantage of reasonably priced investments when they are offered to the market.

As such, having two companies in Berkshire's portfolio that are related in some way to AI—namely Alphabet (GOOGL, GOOG) and Amazon (AMZN)—has to be significant. 

Berkshire acquired a stake in Amazon in 2019; it is currently approximately 0.7% of its total assets. The Alphabet stake is more recent than the Amazon stake, and currently comprises approximately 1.7% of total assets. 

Buffett has allowed trusted subordinates Todd Combs and Ted Weschler, to handle investments in a select group of technology companies over which he has granted them authority to make these investments.

 Each of these companies is still included in Todd and Ted's portfolios, and their continued presence in each of these portfolios is an affirmation of their inclusion in the portfolios due to good reasons that still make them suitable for investment at the current time.

Alphabet's Growth and 2026 Prospects

Alphabet gained an enormous amount of value in 2025, growing about 60%, despite earlier fears about the company’s artificial intelligence (AI) developments at the beginning of the year. 

Many of the concerns that existed regarding Google’s potential to be broken up due to antitrust concerns, competition with generative AI, and the potential of AI assistants displacing Google Search did not come to fruition in 2025, leading to an exceptional rally. 

As Alphabet now leads the generative AI market, many revenue opportunities exist for the company, which has historically lagged behind. One of those opportunities is the possibility of releasing custom-designed Tensor Processing Units into the open market as a differentiator to the GPU market, which could lead to revenue diversification (2026). 

Overall, the catalysts driving Alphabet in 2025 will continue to generate additional value through 2026, and therefore, investors in Alphabet should consider investing in Alphabet as they would in Berkshire.

Amazon’s 2026 Comeback Potential

In the year 2025, Amazon had a small increase of about three percent in share price; however, they still were able to continue making improvements to their business.

For the final quarter of 2025, Amazon achieved some great financial results. They had total revenues of $213.4 billion (an increase of twelve percent year on year) and exceeded market expectations for this quarter of $211.27 billion.

For key business segments, Amazon Web Services (AWS) had total revenue of $35.6 billion (an increase of twenty-four percent year on year) and strengthened its position as one of the primary profit centres of Amazon, with continued growth momentum for both.

Although Amazon was mostly ignored by the market in 2025, there is an opportunity for Amazon to have a significant improvement in 2026. Because Amazon has strength in both the cloud computing and commerce businesses, many expect that 2025 will be a huge comeback for Amazon, as well as AWS remaining one of Warren Buffett's top companies to own.

Long-term Outlook for Berkshire Investors

Berkshire Hathaway's poor performance in the short term (like what will happen in 2025) is simply the nature of a business model that rewards value creation over time and does not pay much attention to short-term trends. 

The long-term performance speaks for itself. The company's operating businesses are generating cash flow, and the pile of cash on hand provides Grig Abel with a lot of options in 2026. 

In addition, by purchasing Alphabet and Amazon, Warren Buffett now effectively has a very good way to get exposure to the potential of AI. Alphabet's growing momentum and Amazon's AWS platform will continue to be important going forward into 2026.

So, rather than concentrating on your scorecard (that is, your year-to-year performance), be more interested in the system that has produced compound returns since 1965.