Berkshire Hathaway’s Buffett Bets on AI: A Look at Three Key Investments

Since Warren Buffett took the helm at Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) in 1965, the company’s stock has delivered an impressive 19.8% compound annual return. A $1,000 investment would have ballooned to a staggering $42.5 million, while the same amount would have only grown to $325,053 in the S&P 500 during that time.

Buffett’s investment philosophy emphasizes acquiring companies with consistent growth, solid profits, experienced management, and favorable policies like stock buybacks and dividends. Known for his steadfast approach, Buffett doesn’t chase short-lived market trends, including the recent surge in artificial intelligence (AI).

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However, three companies within Berkshire’s expansive $296 billion portfolio are creatively incorporating AI into their established businesses.

Image source: The Motley Fool.

1. Amazon: 0.8% of Berkshire Hathaway’s Portfolio

Amazon (NASDAQ: AMZN) stands as the world’s leading e-commerce company. It employs AI in its fulfillment centers to enhance efficiency, alongside launching an AI shopping assistant named Rufus to assist customers in finding products. Notably, investors are particularly interested in Amazon’s cloud computing service, Amazon Web Services (AWS), which aims to dominate three essential AI layers:

• Infrastructure: AWS boasts data centers equipped with Nvidia chips, while also creating proprietary chips like Trainium for AI training and Inferentia for inference. Trainium can reduce developers’ AI training costs by as much as 50%, leading to higher-than-expected production.
• Large Language Models (LLMs): AWS Bedrock allows developers to access AI models from firms like Anthropic and Meta Platforms, expediting their software development. It also features Amazon’s in-house LLMs, Titan.
• Software: Amazon’s Q virtual assistant, integrated into AWS, assists businesses in analyzing their internal data and generating computer code as needed.

In the third quarter of 2024, AWS revenue reached $27.4 billion, marking a 19% rise from the previous year. Notably, AI-related revenue saw a surge of over 100%, and Amazon reports that this segment is expanding three times faster than the cloud business during its early phases.

Berkshire invested in Amazon in 2019, and though Buffett has voiced some regret about not investing sooner, the value of Berkshire’s stake stands at $2.2 billion, showing potential for future gains if Amazon’s AI strategies succeed.

2. Coca-Cola: 8.4% of Berkshire Hathaway’s Portfolio

Coca-Cola (NYSE: KO) may not be the first company that springs to mind when thinking about cutting-edge technologies, yet its success is rooted in innovation. Recently, the company appointed a “head of generative AI” to spearhead its technological initiatives.

AI plays a significant role in Coca-Cola’s marketing. Its “Create Real Magic” campaign invites customers to generate AI-created Christmas-themed digital snow globes through its website. Such interactive strategies allow Coca-Cola to connect with consumers in engaging ways.

Moreover, Coca-Cola employed AI to create a promotional soda variant, Coca-Cola Y3000, utilizing customer data to forecast the flavor it might offer in the year 3000.

Going forward, Coca-Cola aims to substantially invest in AI. The company has recently entered a five-year agreement with the Microsoft Azure cloud service, committing $1.1 billion to enhance its supply chains, productivity, and marketing through AI applications.

Berkshire’s investment of $1.3 billion to purchase 400 million shares in Coca-Cola from 1988 to 1994 remains untouched, now valued at around $25 billion. Although AI wasn’t part of Buffett’s original investment rationale, these technological advancements could greatly enhance the value of that stake.

3. Apple: 25.8% of Berkshire Hathaway’s Portfolio

Berkshire Hathaway invested $38 billion in acquiring its stake in Apple (NASDAQ: AAPL) between 2016 and 2023, with the investment’s value exceeding $170 billion at the start of the year. This represents a remarkable return. However, Buffets’ team has sold more than half of its Apple shares in 2024, possibly reflecting concerns about market valuations.

Apple has leveraged AI for many years, initially enhancing features like autocorrect and recommendation systems. Recently, it launched Apple Intelligence in partnership with OpenAI, bringing transformative writing tools that summarize emails and texts and provide proofreading assistance.

Apple Intelligence can also create images and learn user priorities to improve notification management. With over 2.2 billion Apple devices in circulation, the company has the potential to become the largest consumer AI distributor, driving revenue and earnings growth as new AI features prompt customers to upgrade.

Apple remains Berkshire’s largest investment despite the significant selling this year, emphasizing the potential for substantial gains if Apple capitalizes on AI advancements.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook, 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 has positions in and recommends Amazon, Apple, Berkshire Hathaway, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.