Berkshire Hathaway CEO Warren Buffett was born in Omaha, Nebraska, in 1930 and is one of history's most successful investors. Trained under the tutelage of Benjamin Graham, the father of value investing, Buffett has applied value-focused strategies to deliver incredible performance.
In fact, if you had invested $1,000 in Berkshire Hathaway on the day that Buffett purchased a controlling stake in the company and became its CEO in 1965, you would now be sitting on holdings worth more than $37 million. With that kind of incredible performance, it's safe to say he's earned his nickname, the Oracle of Omaha.
But while Buffett is best known as one of the luminaries of value investing, there are also some high-profile growth stocks in Berkshire's portfolio -- and some of these companies are in the forefront of the artificial intelligence (AI) revolution. If you're interested in how Buffett and Berkshire are playing the AI trend, read on for a look at two artificial intelligence stocks that account for about 25% of the investment conglomerate's $292 billion portfolio.
1. Apple
Apple (AAPL -0.48%) has been Berkshire's biggest portfolio holding for years, and Buffett has been emphatic in his praise of the tech company. At times, he has described Berkshire's investment in Apple as a pillar of his company. He's also said that Apple is probably the best business he knows of in the world.
Even though smartphones are a highly commoditized product, Apple's unsurpassed brand strength and loyal customer base allow the company to command stellar margins with its iPhones. Even with so many different hardware manufacturers competing in the space, it actually captures the large majority of global operating profits on smartphone sales.
Apple's dominance in mobile hardware has helped the company serve up tremendous profits, and backing strong companies with reliable profitability has been one of the cornerstones of Buffett's investing strategy.
Besides the immediate sales and earnings benefits of dominating the mobile hardware market, Apple's competitive position in the space has also opened up other opportunities. Thanks to the company's entrenched mobile business, it has been able to build a strong and highly profitable software and services business.
Apple's strengths in mobile have also served as the foundation for the company's AI strategy. It recently made its Apple Intelligence software platform a key selling point for its iPhone 16 line, and it's likely still in the very early stages of taking advantage of AI-related growth opportunities.
The company is still Berkshire's largest holding and accounts for about 24% of its portfolio, but Buffett and his team of analysts have actually been making eye-catching moves with the stock lately. Berkshire still owns 300 million shares of Apple, but it has actually sold more than 615 million shares since the fourth quarter of 2023.
Reducing its position in Apple has meant that the investment conglomerate has missed out on billions in potential profits, but the move is sending signals that Berkshire is taking a cautious approach to the broader market right now. So even though the AI revolution is presenting potentially massive growth opportunities, Buffett isn't abandoning his value-focused roots.
2. Amazon
Berkshire Hathaway initiated a position in Amazon (AMZN -0.32%) in the second quarter of 2019, and Buffett openly expressed his regret for not having made the move sooner. He even went so far as to call himself an "idiot" for not buying into the tech giant's incredible run sooner.
At 0.7% of Berkshire's stock portfolio, Amazon represents a relatively small holding. On the other hand, it wouldn't be surprising to see Berkshire jump on a buying opportunity and significantly increase its position at some point.
Amazon has a fantastic competitive moat, a characteristic that Buffett has long coveted when it comes to investing in companies. The e-commerce giant has unrivaled scale and infrastructure advantages. It also has fantastic brand strength.
Besides its market-leading online retail business, Amazon also leads in cloud-infrastructure services. Its Amazon Web Services (AWS) segment has grown at an incredible rate over the past decade, and it consistently serves up fantastic profit margins. So even though e-commerce accounts for most of the company's sales, it's actually AWS that generates most of Amazon's profits.
With AWS positioned as one of the go-to infrastructure services for building, deploying, and scaling up AI applications, Amazon looks poised to enjoy strong sales and earnings growth in conjunction with the rise of artificial intelligence. But investors shouldn't overlook the transformative impact that the technology is poised to have on the company's e-commerce business.
Online retail has historically been a relatively low-margin business because of its high operating costs, but Amazon's e-commerce unit could be on the verge of incredible increases for profitability. AI and robotics have the potential to significantly reduce costs for warehouse operations and deliveries, and these advances in supply chain automation will likely unlock billions of dollars in earnings.
So even though Amazon occupies a smaller spot in Berkshire's portfolio, it's an AI stock that investors should be paying close attention to right now.
