As Wall Street remains locked in debate over the return prospects of AI capital spending, a trillion-dollar giant built on insurance, railroads, energy and traditional consumer businesses is quietly climbing toward all-time highs.
On November 2 local time, Berkshire Hathaway Class B shares closed at $556.11, touching an intraday high of $557.59, both setting record levels. At the same time, US AI trades ran into headwinds: the Nasdaq fell 5.3% in October, with mounting concerns over whether the massive AI investments by tech giants can deliver returns.
On one side, AI tech stocks are under pressure; on the other, so-called "legacy stocks" like Berkshire Hathaway are strengthening. This divergence in market style is becoming one of the most noteworthy shifts in US equities recently.
Berkshire's advance reflects both defensive capital searching for a new home and the market gradually digesting the uncertainty surrounding Warren Buffett's departure as CEO. For Greg Abel, who succeeded the "Oracle of Omaha," this rally is undoubtedly a positive signal.
AI Trade Retreats, Berkshire's Defensive Appeal Returns to View
For some time, AI has been the most central trade in US equities. Tech giants kept ramping up investment in data centers, chips and computing infrastructure, driving related stocks higher.
But cracks are appearing in this feast.
As results from tech giants such as Alphabet and Amazon failed to fully meet market expectations, investors began re-examining the costs and returns of AI investment. Enormous capital spending requires continuous financing, and whether these outlays can convert into sufficient cash flow within a reasonable timeframe is becoming a focal point.
In October, the Nasdaq fell 5.3%, and AI-related stocks saw pronounced selling. The market is no longer focused only on technological promise but is also asking: when will such massive investment actually translate into profit?
Against this backdrop, Berkshire's advantages have gradually come to the fore.
With a market capitalization exceeding $1.1 trillion, the company has diversified operations spanning insurance, railroads, energy and industrials, with annual after-tax earnings approaching $50 billion. As of the end of the second quarter, its cash and cash equivalents exceeded $365 billion.
Its enormous cash reserve provides a buffer against market volatility, while the diversified business structure means it does not have to rely entirely on growth in any single industry.
More importantly, Berkshire is not merely a collection of traditional industries. Within its roughly $360 billion equity portfolio, core holdings such as Apple and Coca-Cola have performed well recently, providing support for the company's asset value.
Judging by market performance, capital is reassessing Berkshire's defensive value. Over the past month, Berkshire shares rose about 5%, and as the AI trade retreated, investor attention to asset safety and earnings stability clearly increased.
Buffett Exits, Yet Berkshire Marches to Record Highs
Another layer of meaning behind Berkshire's record share price is that uncertainty over the management transition is gradually fading.
In May 2025, Buffett announced at the annual shareholder meeting that he would step down as CEO at the end of that year. The news once triggered a market selloff, with investors worried whether a Berkshire without Buffett could maintain its long-standing capital allocation capability.
After Abel formally took over as CEO in late 2025, Berkshire's shares initially languished. But as time passed, market concerns about the handover gradually eased.
Abel did not significantly alter the operating system Buffett built.
In his first annual shareholder letter, he said Berkshire would maintain its decentralized management structure, with business heads enjoying broad operational autonomy; the company would also continue to maintain a concentrated equity portfolio, with long-term core holdings remaining an important part of capital allocation.
Abel joined Berkshire in 1999 and previously headed Berkshire Hathaway Energy. Now he has taken over a mature system that has run for decades, rather than a company requiring a complete rebuild.
Berkshire's historical performance also gives the market confidence.
From 1965 to 2025, Berkshire recorded declines in only 11 years, with cumulative returns of about 6,099,294% and an annualized return of 19.7%. Over the same period, the S&P 500's cumulative return was about 46,061%, with an annualized return of 10.5%.
That record stems not from short-term bets but from the compounding effects of holding quality businesses for the long term, using insurance float for capital allocation, and continuously accumulating operating assets.
Still, a record share price does not mean Abel has fully passed the test. His time in the role remains limited, and the market's recognition of Berkshire may be more a re-rating of its asset quality and operating structure than a final verdict on the new CEO's abilities.
$365 Billion in Cash: Abel's Real Test Lies Ahead
The higher Berkshire's shares climb, the harder it becomes for the market to avoid focusing on Abel's capital allocation capability.
As of the end of the second quarter of 2026, Berkshire's cash and cash equivalents exceeded $365 billion. This capital is both a safety cushion against market declines and important ammunition for finding future investment opportunities.
But a cash reserve also means pressure.
Berkshire has long never paid a dividend, and the market's ability to accept that policy has largely stemmed from trust in Buffett's capital allocation ability. With Abel taking over, investors may pay closer attention to whether this cash will be used for acquisitions, stock investments, or simply left on the balance sheet.
For a Berkshire already worth more than $1 trillion, finding large investment opportunities big enough to significantly boost overall performance is also becoming increasingly difficult.
Abel has already begun adjusting the portfolio.
Apple remains Berkshire's largest equity holding. As of the end of June, the company held 227.9 million Apple shares worth about $66 billion, accounting for roughly 22% of its equity portfolio. That proportion has fallen sharply from a previous peak of nearly 50%.
Berkshire had cut its Apple stake by about 75% from roughly 915 million shares in mid-2023. Buffett previously explained that the Apple position was too large relative to Berkshire's overall size.
However, Berkshire has not continued selling Apple shares since late 2025. The market will watch the company's next 13F filing to judge whether it further adjusted holdings in the third quarter.
At the same time, Berkshire is also seeking new investment opportunities. In the second quarter of 2026, the company bought about $17 billion of Alphabet stock, of which about $10 billion came from direct purchases from Alphabet.
This means Abel is not simply replicating Buffett's past portfolio, but rather trying to find new capital allocation opportunities while continuing the long-term investment framework.
"Legacy Stocks" Strengthen as the Market Seeks Answers Beyond AI
Berkshire's record share price does not necessarily mean the market has completely abandoned the AI trade.
But at least at this stage, investors are re-examining the valuation logic of assets: when the relationship between huge capital spending and future returns becomes uncertain, companies with ample cash reserves, diversified businesses and relatively stable earnings are regaining appeal.
Berkshire is the embodiment of this logic.
It has enormous cash reserves, mature operating assets and a long-term investment portfolio, as well as a capital allocation system proven over decades. Buffett's departure was once the market's biggest concern, and now, with the share price back at record highs, it shows investors have at least begun to accept the possibility of Berkshire's continuity in a new era.
Still, Berkshire's long-term performance depends on whether Abel can continue to create value. For this trillion-dollar enterprise, how to make its huge cash reserves work and how to find sufficiently large investment opportunities are the real challenges ahead.
AI down, legacy stocks up. The shift in market style may be only temporary, but Berkshire is proving that beyond the tech narrative, capital markets are still willing to pay for solid asset quality and long-term capital allocation capability.
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