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Berkshire Shareholder Proposes AI Oversight Committee Amid Growing Concerns

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A shareholder of Berkshire Hathaway, the multinational conglomerate led by Warren Buffett, is urging the company to establish a committee of independent directors to oversee artificial intelligence (AI) risks. Tulipshare, an activist investment group based in London, submitted the proposal ahead of Berkshire’s annual meeting, scheduled for May 3. The resolution calls for the formation of a dedicated committee to monitor AI-related issues across the diverse businesses in Berkshire’s portfolio.

The proposal highlights the potential risks associated with AI, such as data breaches, privacy violations, business disruptions, and human rights concerns. Tulipshare argues that due to Berkshire’s vast influence across multiple industries, the company is in a unique position to lead in AI governance and ensure responsible use of the technology.

Berkshire’s spokesperson, Debbie Bosanek, confirmed that the proposal will be included in the company’s proxy statement. Warren Buffett has previously acknowledged AI’s significant potential, both for positive impact and harm. In a 2023 meeting, Buffett expressed unease about AI-generated content when an image and message surfaced that appeared to come from him, despite being fabricated.

However, Berkshire’s governance structure has traditionally been resistant to shareholder proposals calling for independent oversight. Buffett holds significant voting power—controlling over 30% of Berkshire’s voting shares—which makes it challenging for shareholder resolutions to succeed without his endorsement. Last year, a similar proposal to create an independent oversight committee for safety at Berkshire’s BNSF railroad received minimal support from shareholders.

Tulipshare argues that an AI oversight committee would align with Berkshire’s decentralized business model by providing unified oversight without disrupting the day-to-day operations of its subsidiaries. Given Buffett’s personal concerns about AI, particularly deepfake technology, the activist group suggests the proposal might gain traction.

Berkshire Hathaway owns a wide range of companies, including Geico, Brooks, See’s Candies, and Berkshire Hathaway Energy, in addition to its investments in major tech firms like Apple and Amazon. Despite Buffett’s long-standing leadership since 1965, the proposal signals growing shareholder interest in responsible AI governance within large corporations.

Magnificent Seven Set to Shed $1 Trillion in Value, Led by Apple and Nvidia

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Apple (AAPL.O) and Nvidia (NVDA.O) led a sharp sell-off in technology stocks on Monday, fueled by U.S. recession fears and Berkshire Hathaway’s (BRKa.N) decision to reduce its stake in Apple, disrupting a prolonged rally in the sector. High-performing stocks such as Alphabet (GOOGL.O), Amazon (AMZN.O), Meta Platforms (META.O), Microsoft (MSFT.O), and Tesla (TSLA.O) fell up to 12.2% in premarket trading. The losses in the “Magnificent Seven” stocks were set to erase nearly $1 trillion from their combined market value.

Chip stocks, which have been top performers in the AI boom, also tumbled. Advanced Micro Devices (AMD.O), Intel (INTC.O), Super Micro Computer (SMCI.O), and Broadcom (AVGO.O) fell as much as 10.3%. The sell-off followed a weak U.S. payrolls report on Friday, prompting investors to seek safer assets and anticipate Federal Reserve interest rate cuts to support growth.

Warren Buffett’s Berkshire Hathaway announced over the weekend that it had halved its stake in Apple, raising concerns about the tech industry’s outlook. Nvidia shares were also impacted by reports of a potential three-month delay in the launch of its upcoming AI chips due to design flaws, affecting customers such as Meta, Alphabet’s Google, and Microsoft.

Big technology stocks, which had driven Wall Street gains for over a year, have faced pressure recently due to signs that returns from significant AI investments might take longer to materialize. Shares of Amazon, Microsoft, and Alphabet, the three largest cloud-computing providers, fell after their earnings reports failed to meet high expectations of rapid growth from AI investments.

“Expectations have arguably become too high for the so-called Magnificent Seven group of companies. Their success has made them untouchable in the eyes of investors and when they fall short of greatness, out come the knives,” said Dan Coatsworth, investment analyst at AJ Bell.

Berkshire Halves Apple Stake, Boosts Cash to $277 Billion as it Gets ‘Defensive’

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Warren Buffett’s Berkshire Hathaway has significantly increased its cash reserves to nearly $277 billion, while also selling about half of its stake in Apple. This move suggests that Buffett, at 93 years old, is becoming cautious about the broader U.S. economy and potentially overvalued stock market. The company’s results were released after a global stock market selloff, with the Nasdaq entering correction territory and a weak jobs report raising concerns about U.S. economic activity.

Cathy Seifert, an analyst at CFRA Research, interprets Berkshire’s actions as defensive, highlighting the conglomerate’s growing cash stake and reduced stock investments. As of June 30, Berkshire’s cash reserves increased from $189 billion three months earlier, largely due to selling $75.5 billion worth of stocks. Notably, Berkshire sold around 390 million Apple shares in the second quarter, on top of 115 million sold earlier in the year, as Apple’s stock price increased by 23%. Despite these sales, Berkshire still owns about 400 million Apple shares valued at $84.2 billion.

This marked the seventh consecutive quarter in which Berkshire sold more stocks than it purchased. Additionally, Berkshire repurchased only $345 million of its own stock, down significantly from $2.57 billion in the first quarter. Jim Shanahan, an analyst at Edward Jones, noted that Buffett’s reluctance to invest in publicly traded stocks, including Berkshire’s own, raises concerns about his outlook on the markets and economy.

Financial Performance and Strategic Moves

Berkshire’s second-quarter profit from its diverse businesses increased by 15% to $11.6 billion, with substantial contributions from its insurance businesses, including Geico. However, overall revenue saw only a modest 1% rise to $93.65 billion, with notable declines in sectors such as auto dealerships and the Pilot truck stop chain.

The conglomerate’s earnings were buoyed by short-term Treasury returns, which might decline once rate cuts begin. Shanahan suggested that revenue challenges could make it difficult for Berkshire to sustain earnings growth into 2025. Quarterly net income fell 15% to $30.34 billion due to stock price fluctuations affecting Berkshire’s investment values.

Buffett has consistently advised shareholders to disregard quarterly investment gains and losses due to their volatility. Despite substantial cash reserves, Berkshire often accumulates cash when it cannot find attractive investment opportunities. Since mid-July, the company has also sold over $3.8 billion in Bank of America shares, its second-largest stock holding.

Buffett emphasized the importance of making low-risk investments with potential for significant returns. He expects Apple to remain Berkshire’s largest stock investment, although selling shares made sense to mitigate tax implications.

Impact on Key Businesses

Berkshire’s second-quarter results showed mixed performance across its various sectors. Profit at BNSF railroad declined by 3%, affected by legal expenses despite lower operating costs and increased shipping volumes. Berkshire Hathaway Energy’s profit fell by 17%, partly due to lawsuits against its PacifiCorp utility unit, which is blamed for causing wildfires in Oregon in 2020.

Despite these challenges, Berkshire’s Class A shares have performed well, closing at $641,435 on Friday, up 18% for the year, compared to a 12% increase in the S&P 500. As Buffett approaches 60 years of leading Berkshire, Vice Chairman Greg Abel is anticipated to succeed him as CEO.