Warren Buffett, the billionaire CEO of Berkshire Hathaway, hasn’t earned the nickname “The Oracle of Omaha” for nothing.
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His company’s stock doubled the annual return of the S&P 500 from 1965 to 2022, returning 19.8% on average annually vs. the S&P 500’s 9.9%. In 2023, Berkshire Hathaway went up 16% compared to the S&P 500’s 24%.
In addition to his folksy wisdom, Buffett is also known for his general reluctance to buy tech stocks. But what may surprise some investors is that one popular tech stock — with important exposure to artificial intelligence — actually makes up nearly one-third of the Berkshire Hathaway investment portfolio.
The company has small stakes in other AI-related companies as well. After selling its entire stake in Snowflake, a cloud computing-based company worth about $910 million, Buffett is still investing in other companies that rely on the power of AI.
Here’s a look at some of the prominent AI stocks that Warren Buffett is betting on.
Apple (AAPL)
When it comes to AI-related stocks — and tech stocks in general — Apple is really the beginning and the end of the discussion. After shunning tech stocks for decades, Buffett made a major shift on May 16, 2016, picking up nearly 10 million shares of Apple at a split-adjusted price of about $6.81.
Now trading at about $222.74 per share, Apple has posted huge gains on Buffett’s original purchase. Although Buffett has occasionally trimmed Berkshire’s Apple position, with the company unloading about more than 389 million Apple shares during the second quarter of 2024, they still own 400 million shares of the tech giant.
Apple now sits at 30% of the company’s entire investment portfolio. Regardless of what other AI stocks Berkshire might dabble in, it’s clear that the company’s big bet is on Apple.
Buffett has said he views Apple not as a tech company but as a consumer products business. In that field, Buffett sees Apple as the best of the best.
In fact, at the Berkshire Hathaway annual shareholders meeting in May 2023, Buffett said Apple “just happens to be a better business than any we own.” Regarding Apple’s iPhone, Buffett said that if people “had to give up a second car or give up their iPhone, they give up their second car.”
In its quest to continue its dominance in the consumer products world, Apple seems poised to rapidly integrate AI into its stable. Earlier this year, Apple CEO Tim Cook confirmed that generative AI features would be introduced into Apple products in 2024.
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Amazon (AMZN)
Amazon is Berkshire Hathaway’s other primary bet in the tech/AI industry, although it’s a far cry from the company’s love of Apple. Currently, Amazon represents just 0.69% of Berkshire Hathaway’s portfolio — although it’s still a $1.93 billion investment.
Berkshire Hathaway began buying Amazon in 2019, and Buffett has said he was “an idiot for not buying it [sooner].” Even though the stock still appears in the Berkshire Hathaway portfolio — and Buffett is a fan — the CEO wasn’t the one who actually initiated the position.
As Buffett told CNBC at the time, “One of the fellows in the office that manage money … bought some Amazon,” referring to either Todd Combs or Ted Weschler, his two main portfolio managers.
Although Amazon might not seem like a “classic” Buffett stock, it does have many of the competitive advantages that he has long espoused.
From the economic “moat” around its business — which is hard for competitors to breach — to its customer satisfaction levels and excellent management, Amazon has many of the characteristics that make it a so-called “Buffett stock.”
It’s worth pointing out that Amazon has already become a big player in the AI world.
The company recently made a big splash with its rollout of Bedrock, a direct competitor of ChatGPT that could revolutionize the industry.
As told to TechCrunch, Vasi Philomin, vice president of generative AI at Amazon Web Services, said Bedrock will apply “machine learning to the real world — solving real business problems at scale… We think every application out there can be reimagined with generative AI.”
Here are a few other notable ways that Amazon has leveraged AI in its business operations:
- Amazon Web Services (AWS) has become one of the biggest providers of cloud services.
- Amazon launched Q, which is an AI-powered virtual assistant.
- Many homes have an Alexa device, and Amazon has recently planned on adding a generative AI component to.
- Amazon relies on AI for customer recommendations when you’re shopping online.
Bank of America (BAC)
Berkshire started investing in Bank of America in 2007, and now it’s worth 14.3% of the portfolio, which is worth just under $40 billion.
While many may not consider this to be an AI-based stock, Bank of America launched Erica, an AI virtual financial assistant, in 2018. Customers can use the AI-powered tool as a personal financial assistant to help out with individual requests, managing money, tracking bills and any other money management needs. It was recently reported that Erica had helped 42 million clients with two billion interactions since its launch.
Bank of America also recently announced that it would allocate $4 billion to improving AI tools for clients and advisors. While AI-based tools were originally used to save costs through fraud detection and spot issues, they’re now being used to improve customer service.
Martin Dasko contributed to the reporting for this article.
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This article originally appeared on GOBankingRates.com: Warren Buffett: Top 3 AI Stocks You Need in Your Portfolio Now
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