Berkshire Hathaway CEO Greg Abel Is Venturing Into an Area of the Stock Market That Warren Buffett Largely Shied Away From. Here's Why Investors Might Play Along.

Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB) CEO Greg Abel has only been in his new gig for a little under six months. But he's already making his mark on the conglomerate.

Abel stepped into the role after Warren Buffett served as CEO for six decades. Buffett is widely considered one of the greatest investors of all time. During his time at the helm, Berkshire's shareholders enjoyed market-crushing returns. In fact, Berkshire's stock likely received a premium simply because Buffett was CEO.

Given all that, filling Buffett's shoes is essentially an impossible task. But Abel must try, and as he begins to chart his own course for the conglomerate, he's venturing more decisively into parts of the stock market that his predecessor typically shied away from.

Here's why investors might play along.

Image source: The Motley Fool.

Joining the artificial intelligence trade

The Oracle of Omaha famously said he preferred to invest in companies whose businesses he understood, but that doesn't mean he avoided investing in new sectors or industries. For instance, Buffett piled into the consumer tech giant Apple starting in 2016, and at one point, that position grew to roughly 40% of Berkshire Hathaway's massive equities portfolio.

But despite the incredible gains that artificial intelligence stocks experienced in recent years, Berkshire never got too invested in AI during Buffett's tenure. Up until recently, Berkshire held a small position in Amazon, but it's believed that the decision to make that purchase was made by former Berkshire investment manager Todd Combs.

The company also took a stake in Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) last year, while Buffett was on his way out.

This year, Abel has significantly increased the company's position in Alphabet. In the first quarter of 2026, Berkshire more than tripled its stake in the company. More recently, Berkshire announced it would purchase an additional $10 billion in Alphabet stock as part of a massive $85 billion private placement the tech giant was making. Berkshire did get a discount on the purchase.

Alphabet is now a top-five position in Berkshire's portfolio.

Now, we can't know whether or not Buffett would have signed off on these moves if he were still CEO, but they certainly go against many of his core investment principles. For one, purchasing Alphabet this year meant buying the stock at valuations well above its average.

GOOGL PE Ratio (Forward) data by YCharts.

But what makes these investments even more in conflict with Buffett's philosophy is that Alphabet's free cash flow is expected to be negative for the next few years, due to its intense capital investments in AI infrastructure.

As a general rule, Buffett prefers to invest in companies with strong free cash flow. Also, earlier this year, during an interview on CNBC, when asked about good opportunities in the stock market, he replied, "We aren't finding things."

It's possible the sell-off triggered by the Iran war led Berkshire to scoop up Alphabet, but the recent purchase of the stock happened as the market was at or near all-time highs.

Why investors may like a more aggressive Abel

Berkshire Hathaway's market cap is now above $1 trillion, and its stock portfolio alone is valued at around $326 billion. This makes it harder for Berkshire to make meaningful investments in new companies, because its portfolio is already so big that it takes a lot to move the needle.

In the meantime, in recent years, between sales of portfolio holdings and profits, Berkshire has built a cash stockpile that's closing in on $400 billion. Investors want to see the conglomerate put that money to work in more productive assets. The market has also been overtaken by AI, so investors may have been disappointed to see Berkshire miss out on the gains of stocks in that space.

One of the things that makes Berkshire so powerful is its exposure to many different sectors and parts of the economy, including insurance, railways, housing, energy, and more. AI is expected to play a massive role in the economy, so investors may be happy to see the conglomerate increase its exposure.

While Alphabet is no longer a small position in Berkshire's portfolio, it clearly won't be a deal breaker for the diversified conglomerate if the stock struggles.

Additionally, I think Alphabet is a safer way to gain exposure to AI than many of the alternatives. The stock may experience a significant pullback if the AI megatrend falters, but I think the company could navigate through such conditions and still do well in the long term.

Alphabet is fairly diversified itself, with a cloud computing arm, a chip business, a streaming platform in YouTube, an autonomous driving business with Waymo, and its cash cow Google Search business, among others.

That's why I don't think investors should be too worried about Abel's strong move into Alphabet, even if it feels quite different from what Buffett would have done.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, and Berkshire Hathaway. The Motley Fool has a disclosure policy.