In May, the S&P 500 achieved a record high with a 5.1% gain, driven by strong performances from tech stocks, particularly those linked to artificial intelligence. In stark contrast, Berkshire Hathaway's shares remained nearly unchanged for the month, resulting in a year-to-date performance gap of 16.3 percentage points behind the S&P 500, marking the largest disparity in 2026.
At the end of March, Berkshire had a slight edge over the index, but the S&P's impressive rise of over 35% in April and May coincided with a nearly 11% decline in Berkshire's stock. Berkshire's conservative approach, characterized by minimal exposure to AI and a substantial cash reserve of nearly $400 billion, contrasts sharply with the aggressive investments seen in the tech sector.
While some analysts warn that the current enthusiasm for AI could lead to a market bubble, Berkshire's cautious stance may prove beneficial in the long run, reminiscent of Warren Buffett's avoidance of internet stocks during the late 1990s. Notably, new CEO Greg Abel has increased Berkshire's stake in Alphabet to almost $22 billion, making it the fifth largest holding in the portfolio.
Additionally, Berkshire's BNSF railroad is opposing the proposed $85 billion merger between Union Pacific and Norfolk Southern, which is currently under regulatory review. The U.S. Surface Transportation Board has paused its review, seeking more information on the merger's competitive implications, potentially delaying a final decision until fall 2027.
This situation reflects Berkshire's ongoing commitment to maintaining competitive practices in the railroad industry