For the better part of six decades, Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett is putting on a show for Wall Street and the investing community. Despite being as flawed as every other investor, the “Oracle of Omaha,” as he is affectionately known, oversaw a whopping 4,995,105% gross gain in his company’s Class A shares (BRK.A). Yes, until the closing bell on March 15. .
Extensive books have been written detailing the “recipe” that Buffett used to vastly improve the benchmark. S&P 500. Typically, this means finding brand-name businesses with sustainable competitive advantages and reliable management teams.
But you might be surprised to know that three of the 45 stocks Buffett and his investment team currently hold in Berkshire Hathaway’s $366 billion portfolio are advanced artificial intelligence (AI) stocks. According to PwC estimates, AI solutions — that is, software and systems that handle tasks that would normally be assigned to humans — could add $15.7 trillion to global gross domestic product by the end of the decade.
As of March 15, 44% ($159 billion) of the $366 billion portfolio that Buffett oversees at Berkshire Hathaway was working in three widely held AI stocks — and no, Nvidia Not one of them.
Apple: $156,317,767,200 (42.8% of invested assets)
The bulk of Buffett’s “AI holdings” can be found in the largest position in Berkshire’s investment portfolio: tech stocks. apple (NASDAQ: AAPL ). An apple weighs more than 4 times. Bank Americawhich is Berkshire’s second largest holding (10% of invested assets).
While Apple isn’t developing the infrastructure that made Nvidia the foundation of the AI movement, AI solutions are embedded in all of its products and are critical to the company’s long-term growth strategy. Apple uses AI to improve the auto-correction and verbal suggestion capabilities of its US market share-leading iPhone, and recently launched its mixed-reality Vision Pro headset, which uses AI to recognize the eye and Includes manual tracking.
While artificial intelligence solutions are central to Apple’s products, Buffett and his top investors, Ted Weissler and Todd Combs, undoubtedly bought Apple shares for different reasons.
One of Apple’s primary lures is its extraordinary customer loyalty. It is one of the most popular and valuable global brands. Holding 50% or more of the US smartphone market means consumers eagerly await the annual launch of a new iPhone.
The Oracle of Omaha is likely also influenced by Apple’s top management team. In addition to constantly improving iPhone functionality and developing the Apple Watch, Apple CEO Tim Cook is leading a shift that sees his company becoming more service-oriented. The emphasis on subscription services should consistently improve Apple’s margins, smooth out sales fluctuations during the tail end of major iPhone upgrade cycles, and provide consumers with an ecosystem of Apple products and services. Should be encouraged to stay inside.
Another reason why Buffett is a big fan of Apple is the company’s unparalleled capital return program. Apple returned more than $15 billion in dividends to its shareholders last year, and has repurchased $651 billion of its common stock since the start of 2013. This means that Berkshire is steadily becoming a major stakeholder in Apple. lift a finger.
Amazon: $1,744,200,000 (0.5% of invested assets)
The other artificial intelligence stock you’ll find nestled in Warren Buffett’s $366 billion portfolio at Berkshire Hathaway is none other than the e-commerce kingpin. Amazon (NASDAQ: AMZN ).
Amazon is using AI in more ways than can be counted here. Some examples include analyzing what you’re buying and putting in your shopping cart to recommend new products, as well as tailoring ads to its Amazon Web Services (AWS) users and providing customer support. This includes allowing applications to be built using generative AI to improve interaction.
Additionally, Amazon is developing its own graphics processing units (GPUs) for its in-house data centers that could complement or replace Nvidia’s GPUs that have taken the AI movement by storm.
While most people are familiar with Amazon because of its overwhelming dominance of the online market, it’s actually the company’s sub-operating segments that do most of the heavy lifting. Arguably no segment is more important than AWS.
Last year, AWS accounted for one-sixth of Amazon’s net sales, but was responsible for two-thirds of the company’s operating income. Enterprise cloud spending still appears to be in its relatively early innings of expansion, suggesting AWS has had double-digit sales growth for several years. As of September 2023, AWS led all other cloud infrastructure service platforms with a 31% share of global spending.
Interestingly, Amazon is also quite cheap. The stock can still be raised for a discount of more than 40% to its average multiple to cash flow over the past five-year period. While this may not be the traditional “value stock” that Buffett is looking for, it’s certainly something that has piqued the interest of one or both of his top investment aides.
Snowflake: $961,500,271 (0.3% of invested assets)
A third AI stock that, along with Apple and Amazon, accounts for about 44% of Berkshire Hathaway’s invested assets, is the cloud data warehouse company. Snowflake (NYSE: SNOW). This is another Berkshire holding that was almost certainly added due to the influence of Wischler or Coombs.
Snowflake really put itself on the map for AI investors this past summer when it announced a collaboration with Nvidia that would allow Snowflake accounts to use Nvidia’s high-powered GPUs. Snowflake is also providing generative AI solutions to help its customers train, customize and deploy large language models.
What has really drawn investors since it went public in September 2020 is its defined competitive advantages. For example, it may be difficult for users of competing cloud infrastructure service platforms to share information. Because Snowflake builds its infrastructure on top of the most popular cloud platforms, sharing and transferring data is seamless.
Customers also seem to appreciate Snowflake’s transparent pricing policy. Instead of using subscription pricing like many of its peers, Snowflake has chosen to charge users based on how much data they store and how many Snowflake Compute Credits they use.
But despite these well-defined competitive edges, Snowflake’s premium price has been challenging to justify. Gone are its days of triple-digit sales growth. Businesses are still cautious about the near-term outlook for the U.S. economy, with annual Snowflake sales growth expected to slow to about 22 percent this fiscal year. At north of 160 times estimated earnings per share, investors may want to keep their distance and allow Snowflake to grow to its current price.
Should you invest $1,000 in Apple right now?
Before buying stock in Apple, consider this:
gave Motley Fool Stock Advisor The analysis team only indicated what they believed. 10 Best Stocks For investors to buy now… and Apple was not one of them. 10 stocks that made the cut could generate monster returns in the coming years.
Stock Advisor Provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular updates from analysts, and two new stock picks each month. gave Stock Advisor The service has more than tripled the return of the S&P 500 since 2002*.
See 10 stocks
*Stock Advisor returns till March 21, 2024.
Bank of America is the advertising partner of The Motley Fool Company. John Mackey, former CEO of Whole Foods Market, is a member of the board of directors of The Motley Fool, an Amazon subsidiary. Sean Williams has positions in Amazon and Bank of America. The Motley Fool has positions in and recommends Amazon, Apple, Bank of America, Berkshire Hathaway, Nvidia and Snowflake. The Motley Fool has a Disclosure Policy.
44% of Warren Buffett’s $366 billion portfolio is invested in 3 widely held artificial intelligence (AI) stocks Originally published by The Motley Fool