49.1% of Warren Buffett’s $373 billion portfolio is invested in three artificial intelligence (AI) stocks

By | December 19, 2023

Warren Buffett smiles, surrounded by cameras

Warren buffett has led the Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) for more than 50 years. Between 1965 (when he took control of Berkshire) and 2022, the stock returned a whopping 3,787,464%.

That translates into a compound annual return of 19.8%, which is about double the benchmark return S&P500 Table of contents. It could have turned an investment of just $100 in 1965 into more than $3.7 million today. By comparison, the same investment in the S&P 500 at that time would have grown to just $24,700.

Buffett has a simple, but effective strategy

The simplest investment strategies are often the best. Buffett likes to buy shares in profitable companies that are experiencing steady growth, especially if they have strong management teams. He also favors companies returning money to shareholders through dividends and stock buybacks.

He combines these characteristics with a long time horizon, allowing the effects of compound growth to increase the value of his portfolio.

Buffett certainly isn’t following the latest stock market trends, even ones as strong as artificial intelligence (AI), which sent investors into a frenzy in 2023. That said, Berkshire says do own several AI stocks, even though AI isn’t the reason Buffett and his team originally bought them.

Investors might be surprised to know that the following three AI stocks represent a whopping 49.1% of Berkshire’s $373 billion portfolio of publicly traded stocks.

Warren Buffett smiles, surrounded by cameras.Warren Buffett smiles, surrounded by cameras.

Image source: The Motley Fool.

1. Snowflake: 0.3% of Berkshire Hathaway’s portfolio

Snowflake (NYSE: SNOW) is a leading provider of cloud computing services to businesses. It represents just 0.3% of Berkshire’s portfolio, but it’s quickly becoming one of the investment firm’s most direct AI businesses.

Snowflake’s Data Cloud was revolutionary when it launched in 2018. It helps large, complex organizations merge their data from different cloud providers so it’s all in one place for maximum visibility. From there, companies can use powerful analytics tools to extract valuable insights from the data.

Snowflake recently launched Cortex, a brand new platform with AI tools to complement its cloud services. The It Document AI service uses a large language model to help companies gain valuable insights from data in unstructured formats such as contracts or invoices. Then there’s Universal Search, which allows users to find critical information within Snowflake using natural language instead of programming language, so even non-technical employees can get value from their organization’s data.

Cortex also includes a generative AI-powered chatbot called Snowflake Copilot, which serves as a virtual assistant. It is able to convert text-based directions into computer code, which can quickly speed up software development.

Snowflake continues to expand its workforce, with the research and development department growing the fastest. That bodes well for future product releases on the AI ​​front, which will create new monetization opportunities. The company expects to bring in $2.6 billion for its 2024 fiscal year (which ends Jan. 31), but it is neither profitable nor pays a dividend.

Berkshire’s decision to invest in Snowflake stock was likely made by a portfolio manager and not by Buffett himself. Nevertheless, it will be a great long-term AI game.

2. Amazon: 0.4% of Berkshire Hathaway’s portfolio

Amazon (NASDAQ: AMZN) is one of the most diverse technology companies in the world, with dominant positions in sectors such as e-commerce, cloud computing, streaming and digital advertising. Now it is quickly becoming one of the most diverse possibilities in the field of AI.

Amazon focuses on providing the broadest possible range of AI products and services to businesses through its cloud computing business, Amazon Web Services (AWS). The company has already launched its own data center chips, Trainium and Inferentia, which are designed to compete with it Nvidia‘s leading hardware. In addition, AWS offers companies a growing number of major language models to accelerate the development of AI applications.

In fact, Amazon recently invested $4 billion in leading AI startup Anthropic. As part of the deal, AWS will become Anthropic’s primary cloud provider and Anthropic will train its future models on Amazon’s chips. Additionally, Anthropic will make these models available to AWS customers, which will help differentiate the cloud platform from its competitors.

The cloud may be Amazon’s most lucrative AI opportunity, but it’s not the only one. The company uses an AI recommendation engine on Amazon.com to show customers products they are most likely to buy. It also uses AI on its Prime streaming service during top broadcasts like the NFL’s Thursday Night Football; it collects millions of data points from every game to display key statistics that keep viewers informed at the highest level possible.

Berkshire Hathaway bought shares of Amazon in 2019 and its position is relatively small. But Amazon is on track to generate $523 billion in revenue by 2023, which is even more than that Apple (NASDAQ: AAPL), the largest company in the world. Given Amazon’s growing exposure to AI, when Berkshire looks back in a few years, it might want to own more of the stock.

3. Apple: 48.4% of Berkshire Hathaway’s portfolio

Apple is worth over $3 trillion, making it the most valuable company in the world. Berkshire started betting on the company in 2016 and has since poured about $35 billion into the stock. At the time of writing, Berkshire’s position is worth $181 billion and therefore represents no less than 48.4% of Berkshire’s stock portfolio.

That’s not surprising, because Apple has all the features that Buffett likes. Its CEO, Tim Cook, has led the company to consistent growth and monster profits since taking over in 2011. What’s more, Apple is returning huge amounts of that money to shareholders, including $15 billion in dividends and $77.5 billion in stock buybacks during the crisis. fiscal year 2023 alone (which ended September 30).

Consumers and investors know Apple best when it comes to hardware like the iPhone, iPad and Mac PCs. But the company is subtly using AI in all these projects. AI powers the autocorrect feature on all Apple keyboards and the Siri voice assistant. Apple Music also relies on AI to learn what listeners like so it can give them more of that content to keep them engaged.

Additionally, the Apple-designed A17 Pro chip in the new iPhone 15 series can power these on-device AI workloads faster than ever. As more smartphone features adopt AI, putting next-generation chips in these devices can reduce their reliance on external data centers for computing power, leading to a faster, more seamless experience for the user.

There’s also speculation that Apple is pumping millions of dollars a day into AI units across the company – units that build everything from conversational AI models to generative AI applications, which can create text, images and videos. Reports suggest that one such application, Ajax GPT, outperforms OpenAI’s GPT 3.5 model – the original technology that made ChatGPT possible.

That suggests Apple is quickly catching up with some of the leading developers in the AI ​​industry, which could lead to powerful new features for its products in the coming years. Buffett and his team could look like rock stars if Apple becomes a real player in AI, given Berkshire’s massive position in the stock.

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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. Anthony Di Pizio has no positions in the stocks mentioned. The Motley Fool holds positions in and recommends Amazon, Apple, Berkshire Hathaway, Nvidia, and Snowflake. The Motley Fool has a disclosure policy.

49.1% of Warren Buffett’s $373 Billion Portfolio Is Invested in Three Artificial Intelligence (AI) Stocks was originally published by The Motley Fool

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