Warren Buffett was born in 1930 and bought his first stocks at the age of 11. In 1965 he ran his own investment company called Berkshire Hathawaywhich he still runs today.
Buffett has led Berkshire to a total return of 4,384,748% over the past 58 years, which would have been enough to turn a $1,000 investment into over $43.8 million. The same investment in S&P500 the index over the same period would only be worth $312,230.
Berkshire’s incredible success stems from a simple strategy. Buffett likes to own companies with steady growth, good profitability, and strong management teams. He particularly likes companies that return money to shareholders in the form of dividends and stock buybacks. One thing he’s never done is follow the latest stock market trends, whether it’s the Internet, cloud computing or, now, artificial intelligence (AI).
That said, many stocks owned by Berkshire have turned their attention to the AI revolution. Two of them now represent a combined 40.2% of the conglomerate’s $362 billion portfolio of publicly traded stocks and securities.
1. Amazon: 0.5% of Berkshire Hathaway’s portfolio
E-commerce was AmazonIt is (NASDAQ:AMZN) core business when it was founded in 1994, but the company has since expanded into cloud computing, streaming, digital advertising and AI. Berkshire only purchased Amazon stock in 2019, and Buffett has often expressed regret for not recognizing this opportunity sooner. Today, Amazon’s valuation of $1.9 trillion makes it the fifth largest company in the world.
Amazon Web Services (AWS) is the largest cloud service provider by revenue in the world. It offers hundreds of solutions to help businesses thrive in the digital age and has also become a delivery platform for many of Amazon’s AI initiatives. CEO Andy Jassy wants to dominate the three main layers of AI: infrastructure (chips and data centers), large language models (LLMs), and customer-facing AI applications.
Like most cloud providers, AWS offers its customers an infrastructure optimized by NvidiaThe industry’s leading graphics chips (GPUs) designed to process AI workloads. However, it has also designed its own chips, and Jassy says there is strong demand for its latest Trainium 2 hardware due to its attractive price and performance.
AWS also continues to expand its Bedrock platform, which hosts a growing number of ready-to-use LLMs. Creating an LLM requires significant amounts of data and financial resources. Using an existing model can therefore accelerate the development of AI applications. Amazon has created its own family of templates called Titan, but AWS customers can also access templates from leading startups like Anthropic, which Amazon recently invested $4 billion in.
To cover the third and final layer, Amazon recently launched an AI virtual assistant called Q. It is capable of analyzing any company’s internal data to provide useful insights, and it can also write, test, and debug code IT to speed up publication. new software. It is the ultimate productivity tool for AWS customers.
Amazon generated $574 billion in total revenue last year, more than any of its tech peers in the trillion-dollar club. However, even though the company has been profitable for the past three quarters, it has historically generated consistent losses because it prioritized massive investments in growth. Combined with the lack of a dividend or buyback program, this doesn’t tick many of Buffett’s usual boxes.
This could explain why Amazon shares represent only 0.5% of Berkshire’s portfolio. However, the conglomerate may wish to hold a larger stake in the coming years as AI opportunities arise.
2. Apple: 39.7% of Berkshire Hathaway’s portfolio
Buffett certainly didn’t show much hesitation when purchasing Apple (NASDAQ:AAPL) action. Berkshire first invested in the iPhone maker in 2016 and has since spent about $38 billion accumulating shares. Thanks to a significant rise in the stock price, Berkshire’s stake in Apple is currently worth a whopping $143.5 billion, even taking into account the recent sale of 13% of the conglomerate’s position.
The iPhone is Apple’s flagship product, but it has a portfolio of hardware hits, including the iPad, Watch, Mac computers, and iPhone accessories like AirPods. Apple also offers a growing number of services, including Apple Music, Apple News, Apple TV, and iCloud, to name a few. These services are typically subscription-based and generate much higher profit margins than Apple’s hardware products, so they are often a point of interest for investors.
Apple didn’t become a $2.8 trillion company by standing still, and while it has been less vocal about its AI aspirations than other tech giants, it could have a significant impact on emerging industry. There was a first clue inside the latest iPhone 15 Pro. It features a new Apple-designed A17 Pro chip, which improves the smartphone’s ability to handle AI workloads, like those behind the Siri voice assistant and keyboard auto-correction feature. .
In March, rumors began circulating that Apple was in partnership talks with leading AI chatbot developers like Alphabet (Google) and OpenAI. These apps could help Apple customers quickly create content, from emails to images, on their devices. They could also become virtual assistants who can do anything from answering complex questions to offering gift suggestions.
If history is any guide, Apple could charge these companies billions of dollars to have their AI chatbots installed on its 2.2 billion active devices worldwide. After all, Apple already charges Alphabet around $18 billion a year to set Google as the default search engine on its Safari browser – a similar fee for Alphabet’s Gemini chatbot wouldn’t be surprising. More information will likely be revealed about Apple’s AI plans at the Worldwide Developers Conference in June.
Notably, Apple meets most of Buffett’s criteria. The company generates consistent revenue growth most years, is highly profitable, and its CEO, Tim Cook, regularly receives praise from Buffett. Additionally, Apple pays a regular dividend and just announced a new stock repurchase program worth $110 billion, which is the largest in the company’s history.
So why did Berkshire recently sell 13% of its stake in Apple? Buffett says it was for tax reasons (he speculates that corporate taxes could rise in the future), but he assured investors that Apple would likely remain Berkshire’s largest holding at the end of 2024.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends Alphabet, Amazon, Apple, Berkshire Hathaway and Nvidia. The Motley Fool has a disclosure policy.
40.2% of Warren Buffett’s $362 billion portfolio is invested in 2 artificial intelligence (AI) stocks was originally published by The Motley Fool