49.5% of Warren Buffett’s $361 billion portfolio is invested in 3 AI stocks. This number is increasing.
Nearly half of Berkshire’s $361 billion portfolio is invested in just three AI stocks. Moreover, this ratio is increasing, as Buffett and his team at Berkshire trim their other stock positions. But this trio, for the most part, withstood the wallet cull. All three offer excellent investment opportunities and may deserve a place in your investment portfolio.
Let’s take a closer look at the three AI stocks backed by Berkshire.
1. Apple: 48.8% of Berkshire Hathaway’s portfolio
Berkshire Hathaway has purchased Berkshire Hathaway shares for the first time apple (Camel 0.74%) In 2016 and continued to buy stocks. Its last purchase was in the first quarter of 2023 when Buffett and his team added an additional 20.4 million shares, bringing the total to 915.6 million. These stocks now represent about 48% of Berkshire’s investment portfolio.
There’s a lot to like about Apple for Buffett. Its combination of hardware, software, and services gives it a strong moat. And this moat is not limited to competitors, as evidenced by the iPhone’s smartphone market share of more than 55% in the United States. Buffett said at a Berkshire Hathaway shareholder meeting earlier this year that people would rather give up their cars than their iPhones if they had to choose.
Apple has been a long-time investor in artificial intelligence, but you may not realize it. The company has a history of focusing on consumer benefits rather than the technology behind how it creates those game-changing features in its products. For example, AI powers a lot of the new features in the new iOS and WatchOS, like live voicemail, crash detection, and abnormal ECG detection.
Apple has also begun investing heavily in the forefront of AI development: generative AI. It has reportedly built its own large language model and is internally testing its ChatGPT-style chatbot.
As the platform owner, Apple has a huge advantage if and when it rolls out a generative AI application like a chatbot. It can integrate directly into native iOS, MacOS, and WatchOS software that is already used by more than 2 billion people around the world. This is a huge advantage that could provide new revenue opportunities for Apple or simply make its devices more desirable.
With shares trading at about 29 times 2024 earnings estimates, Apple stock carries a premium compared to Standard & Poor’s 500. However, thanks to its huge cash position and stock buyback program, the stock is worth that premium. Investors shouldn’t shy away from Buffett’s favorite stocks.
2. Amazon: 0.4% of Berkshire Hathaway’s portfolio
Berkshire Hathaway owns 10 million shares Amazon (Amzn 0.37%) After giving its site a slight trim in the last quarter. The holding company first bought a stake in early 2019. Buffett has previously lamented his inability to address the strength of Amazon’s business model and the value of the company as the main reason that prevented him from buying the stock earlier.
Amazon has built a strong foundation in AI innovation that can be seen throughout its operations. From product recommendations to supply chain management to logistics routing, AI is essential to improving Amazon’s bottom line, so it has invested heavily in building advanced algorithms. More recently, Amazon has integrated more advanced artificial intelligence into its Alexa voice assistant.
But Amazon is also a big technology company that is investing in both hardware and software for generative AI. Its cloud computing business, Amazon Web Services, is helping more and more companies bring AI capabilities into their businesses and data analysis. It has invested $4 billion in Anthropic, one of the leading companies in developing artificial intelligence. Anthropic later agreed to use Amazon’s Trainium chips to train its large language model in the Amazon cloud.
As a leading provider of enterprise cloud services, Amazon is strongly positioned to capitalize on the growing demand for artificial intelligence. Despite its high valuation, the stock remains attractive because the tech giant is showing improving margins and its AI investments give it plenty of potential to beat analysts’ expectations in the future.
3. Snowflake: 0.3% of Berkshire Hathaway’s portfolio
Berkshire Hathaway bought a stake in… Snowflake (the snow 1.79%) Just before its 2020 IPO. The 6.13 million shares it acquired have remained unchanged since then, and now represent about 0.3% of the company’s investment portfolio.
Snowflake has artificial intelligence at its core. It specializes in data lakes, which store unstructured data from companies. It uses artificial intelligence to ingest that information and create insights for organizations, which can then be retrieved from the data warehouse as needed. Snowflake eliminates the need for businesses to invest in their own storage and processing and works with all major public cloud computing providers.
As the amount of data generated by organizations increases, especially in the development of new AI applications, Snowflake’s data storage and processing service becomes increasingly valuable. Furthermore, Snowflake allows companies to sell their data on its marketplace, which could become a big business as AI developers search for data to feed into their models and applications.
Despite its strong recent price performance, Snowflake stock is trading at a significant value relative to its historical prices. Its price-to-sales ratio of 22.9 is lower than where it started the year, and well below the historical average price-to-earnings ratio of over 34. As data continues to fuel the AI revolution, Snowflake will play a critical role in helping companies understand what’s going on That data and access to it, leading to strong revenue growth for years to come.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adam Levy holds positions at Amazon and Apple. The Motley Fool has positions in and recommends Amazon, Apple, Berkshire Hathaway, and Snowflake. The Motley Fool has a disclosure policy.