How Buffett Bet on 'Boring Industries' and Unexpectedly Rode the AI Wave: These Companies Are the Key Beneficiaries

"Invest in businesses you can understand" is the long-standing investment principle of "Oracle of Omaha" Warren Buffett. Today, as the artificial intelligence (AI) boom sweeps across markets, this seemingly conservative strategy has unexpectedly enabled Berkshire (BRK.A-US, BRK.B-US) to gain significant returns from the surge in AI infrastructure.

According to CNN, 96-year-old Buffett recently stepped down as Berkshire's chairman. Over his 60-year tenure, he transformed Berkshire into an investment powerhouse, consistently favoring traditional businesses deeply rooted in the real economy—such as insurance, railroads, and utilities—with a core philosophy centered on value investing rather than chasing the market's hottest trends.

Since the rise of AI, Berkshire has indeed held stakes in AI-related companies like Apple (AAPL-US) and Alphabet (GOOGL-US), but it has not aggressively pursued high-flying AI stocks.

Nevertheless, Berkshire is still reaping substantial returns from the expansion of AI infrastructure, and the real source of these gains lies in the company's seemingly dull investments.

The AI boom demands massive energy, and the rapid expansion of data center construction has fundamentally reshaped electricity demand, making utility companies primary beneficiaries.

Berkshire owns several large utility companies that provide power across the United States, as well as firms that manufacture components used inside power plants.

AI Power Demand Boosts Utility Value

One of Berkshire's largest stock holdings remains Apple. Buffett began investing in Apple in 2016, primarily viewing it as a durable consumer product company. In June this year, Berkshire announced its stake in Alphabet, a more direct investment tied to AI themes and somewhat different from its traditional investment preferences.

Notably, however, it is still energy that underpins Berkshire's AI-related gains.

In 2000, Berkshire completed the acquisition of MidAmerican Energy, a utility company primarily supplying electricity to Iowa and the U.S. Midwest.

At the time, AI was clearly not a consideration in Buffett's investment decision. Yet over two decades later, the rapid increase in AI's energy demand has unexpectedly turned this early move into a major beneficiary.

Ken Mahoney, CEO of Mahoney Asset Management, said Berkshire had already positioned itself in AI's most fundamental needs—energy and utilities—allowing it to benefit from industry growth without having to predict which specific AI company would ultimately succeed.

He noted that Buffett has long understood the value of businesses essential to economic operations, and sometimes the more "boring" a company is, the more stable profits it can generate.

MidAmerican currently supplies power to multiple regions, including Iowa, which has become a hub for data centers. Greg Abel, CEO of Berkshire, stated at the company's annual shareholder meeting in May that 8% of Berkshire's energy load in Iowa last year came from data centers.

Cathy Seifert, a director at CFRA Research, pointed out that when Berkshire acquired MidAmerican, there was no strategy to "leverage AI," so this outcome involves an element of luck. However, re-examining Berkshire from an AI perspective remains a noteworthy investment angle.

Seifert believes this reflects Buffett's ability to select high-quality businesses, which are now becoming "AI-adjacent beneficiaries" due to the expansion of the AI industry.

Additionally, Berkshire holds other utility companies, such as NV Energy, which operates in Nevada—a state also experiencing rapid data center construction growth. Buffett's unexpected AI bet is thus manifesting in multiple forms.

Berkshire Hathaway acquired Precision Castparts in 2016, a company that produces components used in turbines, which are key parts of power generators. Berkshire once had to record an $11 billion impairment on this acquisition, and Buffett admitted he "paid too much" at the time.

However, as the AI boom drives up electricity demand, the need for gas turbines has surged significantly, and Precision Castparts is precisely the company producing the complex components required by this industry.

Adam Patti, CEO of VistaShares, which manages a fund inspired by Berkshire, stated: "Turbines are one of the biggest bottlenecks for data centers. They are in the most favorable position. It's truly incredible."