Warren Buffett’s Surprise AI Investments: Apple and Amazon
Warren Buffett, known for his conservative investment style, isn’t exactly synonymous with technology stocks. Instead, he typically favors well-established companies in sectors like financial services, oil, and consumer goods—areas that promise steady growth over time.
However, a closer examination of Buffett’s portfolio reveals he is not entirely absent from the artificial intelligence (AI) sector. His notable stakes in two prominent companies account for 26% of Berkshire Hathaway‘s $271 billion portfolio, clearly highlighting his presence in the AI conversation.
Buffett purchased these stocks a few years back without the specific intent of capitalizing on AI advancements. Yet, as these companies ramped up their investments in AI, he has remained committed to them. Let’s delve into Buffett’s preferred AI stocks to see if they might be suitable for your investment strategy as well.
Image source: The Motley Fool.
1. Apple: A Core Component of Buffett’s Portfolio
Apple (NASDAQ: AAPL) comprises over 25% of Berkshire Hathaway’s holdings, making it one of Buffett’s largest investments. Together with four other key companies—American Express, Bank of America, Coca-Cola, and Chevron—Apple accounts for 70% of the portfolio’s overall value.
While Buffett has sold some shares in recent quarters, it’s essential to understand the reasons behind these moves. Having owned Apple stock since 2016, which has appreciated by more than 700%, he appears to be strategically taking profits due to expectations of rising capital gains tax rates. His ongoing stake reinforces Apple’s significance in his investment strategy.
It’s no surprise that Apple is famous for its popular products, such as the iPhone and Mac. Recently, the company has shifted focus towards generating revenue through services, achieving record highs each quarter.
AI represents another potential growth avenue for Apple. The company is launching Apple Intelligence, a suite of generative AI features aimed at enhancing user experience in both work and leisure. This could strengthen Apple’s competitive edge, a factor that aligns well with Buffett’s investment philosophy of prioritizing companies with solid moats.
Apple’s diversified success means it does not solely depend on AI, making it a compelling choice for cautious investors looking for exposure to this booming technology. Currently trading at 30 times forward earnings estimates, Apple’s historical performance suggests a favorable buying opportunity.
2. Amazon: A Steady Player in AI Innovation
Amazon (NASDAQ: AMZN) contributes less than 1% to Berkshire Hathaway’s portfolio but has been a consistent presence since 2019. Buffett has always appreciated Amazon, even admitting he regretted not buying it earlier.
In a 2018 CNBC interview, he remarked, “It’s far surpassed anything I would have dreamt could have been done. I blew it.”
Today, Amazon is heavily engaged in AI technology. Its AI applications not only enhance its operations but also shape the services it offers to other businesses through its cloud computing subsidiary.
AI helps Amazon optimize its fulfillment network operations, promising to reduce service costs by 25% with the introduction of cutting-edge robotics at new fulfillment centers.
Amazon’s cloud computing arm, Amazon Web Services (AWS), has also made significant strides in AI. Offering tools for developing large language models and analytics, AWS is positioned for tremendous growth, currently boasting an annualized revenue run rate of $110 billion.
Investing in Amazon appeals to both conservative and aggressive investors. Its storied history of earnings growth alongside robust AI innovations positions it as an attractive choice for anyone looking to capture potential long-term gains from AI technology.
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Bank of America is an advertising partner of Motley Fool Money. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. American Express is an advertising partner of Motley Fool Money. Adria Cimino has positions in Amazon and American Express. The Motley Fool holds positions in and recommends Amazon, Apple, Bank of America, Berkshire Hathaway, and Chevron. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and may not reflect the views of Nasdaq, Inc.
