Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett is one of history’s most successful investors. Under his leadership, Berkshire Hathaway has risen to become the world’s ninth-largest company, with a market capitalization of roughly $959 billion today.
In addition to its dozens of fully and partially owned subsidiary businesses, Buffett’s conglomerate also owns a portfolio of publicly traded stocks worth $287 billion as of this writing. And while the Oracle of Omaha is best known as a value investor, that portfolio actually has significant exposure to the rise of artificial intelligence. With that in mind, read on for a look at two of the most high-profile AI stocks in the Berkshire Hathaway portfolio.
Apple is Buffett’s biggest overall bet and his top AI play — but there’s a catch
Keith Noonan: Accounting for 23.2% of the value of Berkshire Hathaway’s public equity portfolio, Apple (NASDAQ: AAPL) is the conglomerate’s biggest stock holding, and by default also its biggest AI stock holding. The investment has been an incredible performer for Berkshire Hathaway: Apple shares have delivered a total return of more than 800% since Buffett’s company first bought the stock in the first quarter of 2016.
The tech giant recently rolled out its Apple Intelligence software with its iPhone 16 smartphones, and it’s positioning AI as a key selling point for its next-generation mobile devices. In addition to being a huge sales and profit driver in its own right, Apple’s dominant position in the mobile hardware market gives the company some big advantages in the artificial intelligence race.
Thanks to its large and highly engaged mobile hardware user base, the company has access to troves of valuable data and a loyal customer base to sell add-on services to. Notably, Apple’s software and services business is now on track to generate over $100 billion in annual revenue.
However, while Apple has served up great stock performance and has some big AI opportunities on the horizon, Berkshire Hathaway has made some eye-catching moves with the stock lately. Berkshire Hathaway’s recently published third-quarter report revealed that the conglomerate had once again sold a significant amount of Apple stock during the period. It still owns roughly 296 million shares of Apple stock, but that’s down by more than two-thirds from its peak holding of roughly 907.6 million shares.
So why is the Oracle of Omaha’s company reducing its stake in Apple? Investors will have to do some guessing on that one, but it looks like Buffett and his teams of analysts are becoming more bearish in their outlook for the stock market at large. With the S&P 500 index up roughly 21% across this year’s trading, Berkshire has opted to reduce its stock holdings and build up its cash position instead.
The combination of valuation concerns and a risky macroeconomic and geopolitical backdrop could be factors in the conglomerate’s strategic shift. So while artificial intelligence presents big growth opportunities, Berkshire’s recent moves with Apple stock are a reminder that it’s best not to put all eggs in one basket.
The tiny tech bet
Jennifer Saibil: Amazon (NASDAQ: AMZN) has nowhere near the same amount of clout in Buffett’s portfolio as Apple, accounting for only 0.7% of Berkshire Hathaway’s stock holdings. Buffett has said that it was one of his investment managers who made that purchase, although the portfolio has benefited from owning this top AI stock.
Most people still think of Amazon first as the king of e-commerce. The average Amazon Prime member may not know much about the Amazon Web Services (AWS) segment, but it has emerged as the global leader in the cloud infrastructure industry. It has 31% of that market, although Microsoft‘s Azure is running a reasonably close second with 25%.
Generative AI has become a major component of all of the major cloud players’ attempts to stay competitive and capture market share, but as the leader, Amazon has the most to prove, and to gain. It has released a slew of generative AI services to meet every need and budget, and it’s even developing its own AI processors, which enables it to offer a broader range of prices to its cloud services clients.
Over the past few months, CEO Andy Jassy has made several mentions of how big this opportunity is. “About 90% of the global IT spend is still on-premises,” he said in August. “And if you believe that equation is going to flip, which I do, there’s a lot of growth ahead of us in AWS as the leader.” He added, “I also think that generative AI itself and AI as a whole, it’s going to be really large.”
It also bears mentioning that Amazon’s AI is a lot more than AWS and the generative sort. The company uses AI to parse its unmatched hoard of consumer-shopping data, and the results of those analyses drive its e-commerce sales, helping it offer better side-by-side comparisons and more accurate recommendations. Its data also informs its logistics network, helping it to get products to customers more rapidly and at lower costs.
It also applies AI to its digital advertising business, offering partners the same rich data, and exposure to shoppers who are already looking for their products. It’s now introducing this on its ad-supported streaming sites, kicking up the ad business another notch.
Amazon’s AI story is just taking off, and investors should join Buffett for the ride.
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*Stock Advisor returns as of November 4, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, Berkshire Hathaway, and Microsoft. 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.
