Abel: Two ways Berkshire hopes to cash in on AI

Berkshire Hathaway CEO Greg Abel told CNBC the company is pursuing artificial intelligence opportunities on two paths.

In a live "Squawk Box" interview Wednesday morning , Abel said he sees providing energy to the growing number of AI data centers as a "significant opportunity for Berkshire and Berkshire Hathaway Energy" since he's long believed the biggest constraint for the buildout is having enough energy to operate the power-hungry facilities.

But, he said, the company will only sell energy to hyperscalers if there is "no impact to the rates of our other customers."

The other avenue is Berkshire's now almost $36 billion investment in shares of Google parent Alphabet that was initiated by Warren Buffett last year.

Abel said from the experience of Berkshire's own operating companies, he and Buffett knew AI was "going to have a significant impact on America and businesses," and " we saw Google as a significant player ."

Abel did the interview from Japan, where he was visiting a Berkshire tool-making unit and meeting with executives of the "trading houses" in which Berkshire has significant equity stakes.

He said none of them mentioned rising Japanese interest rates as a "fundamental challenge right now."

And while Abel does not see "any type of immediate recovery" for U.S. homebuilders with a "bumpy road for a while," he expects Berkshire's newly acquired Taylor Morrison will be a "very strong asset" five to 10 years from now because the "American dream will continue to exist."

Abel acknowledged there is growing opposition in the country to the construction of new data centers for AI.

"There is a lot more pushback in the communities across the U.S."

He believes companies building data centers need to "seriously evaluate" the "reaction from communities," and address those concerns by using technologies that minimize water use, as one example.

Abel pointed out that in Iowa, where Berkshire has a substantial utility operation, data centers have provided "very, very substantial" tax relief for residents and provided revenues that support local services like schools, the police, and fire departments.

He argued a data center has to be a "welcomed member of the community."

In the interview, Abel described how Berkshire came to make a $10 billion purchase of Alphabet stock directly from the company this spring as Google's parent raised $80 billion to "fund investments in its world-class AI compute infrastructure to meet its unprecedented customer demand."

Noting that Buffett had initially purchased Alphabet shares for Berkshire's portfolio last year, Abel recounted he received a phone call on a Sunday morning in late May with an offer to participate in a large equity offering by Alphabet.

"They hadn't set the size but recommended that we consider 10 billion."

Abel replied he would "get back to them right away," and "very much consistent with how we manage Berkshire ... I called Warren and I said we had a significant opportunity to ... continue to invest in Google ... with a significant block."

They agreed they were "comfortable" with a $10 billion purchase at a 6 1/2% discount "and then ultimately consummated the transaction."

Abel told Becky Quick that Berkshire Hathaway will continue to sell yen-denominated bonds as needed to make future investments in Japan, despite the nation's 10-year bond going just above 3% this week, its highest yield in 30 years .

He noted rates in Japan are "still relatively modest when you think about it." The U.S. 10-year yield is close to 4.8%.

Abel expects Berkshire will continue to hold its investments in Itochu Corp. , Marubeni Corp . , Mitsubishi Corp. , Mitsui & Co ., and Sumitomo Corp . "for many decades," saying he had "just exceptional discussions" with their managements.

"We've been building really strong relationships with each of the companies, and looking at other opportunities here in Japan, and for that matter, abroad."

Abel declined to comment on reports Berkshire might team with Tokio Marine on a major international acquisition.

In March, Berkshire paid $1.8 billion for a roughly 2.5% stake in the Japanese insurer and entered into a "long-term strategic relationship" to create "compelling" opportunities for both companies.

Abel did say the partnership is "very broad" and "there's no obligation to act on it."

"But if it were to make sense, both for Tokio Marine and for ourselves, of course, we'd love to pursue a transaction with them."

Audio of the entire interview begins at 5:00 in the Sept. 2 edition of the "Squawk Pod" podcast .

Berkshire Hathaway first invested in Japan's five main " trading houses " just over six years ago, and it consistently increased its position. Berkshire now owns more than 10 percent of each of the top five.

He joins us for a business update and what he's seeing there. And, Greg, it's great to see you. Thank you for joining us.

GREG ABEL : Good morning, Becky. Great to be on "Squawk Box".

BECKY QUICK : Good morning. Although I, I see it's evening there in Japan as we would anticipate.

Greg, let's talk a little bit about what you're doing there, why you're in Japan right now.

GREG ABEL : Yeah. It really serves a couple of great purposes.

First of all, upon arriving, I was able to go visit Tungaloy . It's one of our operating units here based in Japan. It's part of IMC, a company that makes tool bits. So spent the afternoon up in Fukushima with our team there.

And it's really amazing story. We acquired it back in 2008. And over that period of time, really built a business from, from scratch.

It came out of Toshiba, but a relatively small company and three, so a number of significant plants up in Fukushima. So spent the day there touring it.

We have 15 hundred employees in Japan and really, just really unique.

Here's a company that has just under $240 million of sales in Japan and an incremental $400 million internationally.

So, very small group just doing remarkable things. And it's a, it's a great way to start a trip.

And then, obviously, been visiting with our, each of the five trading houses and Tokio Marine.