AI Utility: Strengthening Business Moats

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  Stocks and Investing on Sun, Sep 20th, 2026 by The Motley Fool
      Locale: UNITED STATES

The Distinction Between AI Hype and AI Utility

Central to this strategy is the distinction between companies that sell AI and companies that utilize AI. The market is currently saturated with firms attempting to monetize the raw power of generative AI. These companies often face high capital expenditures and unpredictable revenue streams, making them antithetical to the traditional Berkshire model.

Conversely, the companies in Berkshire's portfolio—most notably those integrated into the consumer electronics and services space—approach AI as a feature set rather than a standalone product. By integrating AI into an existing user base of billions, these firms can drive retention and increase the lifetime value of a customer without the existential risk associated with launching a brand-new technology from scratch. This is the essence of the "moat": using AI not to create a new business, but to make an existing business nearly impossible to displace.

The Infrastructure of Intelligence

Beyond consumer-facing software, Berkshire's interest in AI extends to the underlying physical infrastructure. AI is not an ethereal cloud; it requires massive amounts of energy, specialized cooling, and robust power grids. Berkshire Hathaway Energy (BHE) and its various utilities are positioned to benefit from the exponential increase in power demand driven by data centers.

From a research perspective, this indicates a diversified bet. While the software layer of AI is volatile and subject to rapid obsolescence, the energy layer is static and essential. By owning the power generation and transmission systems that fuel AI data centers, Berkshire secures a hedge against the volatility of the tech sector. Regardless of which specific AI model wins the market share war, the winner will still require electricity, ensuring a steady stream of predictable revenue for the utility arm of the conglomerate.

Evaluating Intrinsic Value in an Algorithmic Age

The challenge for any value investor in 2026 is determining the "intrinsic value" of a company whose growth is predicated on a technology that evolves weekly. The traditional method of projecting future cash flows becomes difficult when the competitive landscape can be upended by a single software update.

Berkshire's strategy appears to be a mitigation of this risk through the selection of "toll bridge" businesses. A toll bridge business is one that occupies a critical point in a value chain; users must pass through it to reach their destination. In the AI era, this means investing in platforms that control the interface between the user and the AI. When a company controls the hardware and the operating system, they effectively act as the gatekeeper for AI services, allowing them to capture value regardless of which underlying LLM is providing the intelligence.

Conclusion

Berkshire Hathaway's engagement with artificial intelligence serves as a blueprint for cautious optimism. By eschewing the speculative bubble and focusing on infrastructure and ecosystem dominance, the conglomerate demonstrates that the principles of value investing remain relevant even in the face of total technological transformation. The goal is not to find the next "disruptor," but to invest in the entities that are stable enough to absorb the disruption and use it to their advantage.