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Warren Buffett, CEO of Berkshire Hathaway, was born in Omaha, Nebraska, in 1930 and is one of the most successful investors in history. Trained under the tutelage of Benjamin Graham, the father of price investing, Buffett implemented price-based methods to generate returns.
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 the most productive known as one of the pinnacles of price investing, Berkshire’s portfolio also includes leading growth stocks, and some of those corporations are at the forefront of the synthetic intelligence (AI) revolution. . and Berkshire are cashing in on the AI trend, read on for two synthetic intelligence stocks that make up about 25% of the investment conglomerate’s $292 billion portfolio.
Apple (AAPL -0. 30%) has been the largest stock in Berkshire’s portfolio for years, and Buffett hasn’t stopped praising the tech company. He has at times described Berkshire’s investment in Apple as a pillar of his company. He also said that Apple is probably the most productive company he knows in the world.
Although smartphones are a highly marketed product, the unparalleled strength of Apple’s logo and its unwavering visitor base allow the company to achieve exceptional margins with its iPhones. Even with so many other hardware brands competing in this field, they capture the vast majority of global operating profits in smartphone sales.
Apple’s dominance in cellular hardware has helped the company generate massive profits, and backing companies with reliable profitability has been one of the cornerstones of Buffett’s investment strategy.
In addition to the rapid sales and profits derived from dominating the cellular hardware market, Apple’s competitive position in this domain has also opened up other opportunities. Thanks to the company’s well-established mobile business, it has been able to create a strong and highly successful business and software.
Apple’s strengths in cellular have also served as a foundation for the company’s AI strategy. It recently made its Apple Intelligence software platform a key promotional point for its iPhone 16 line, and is most likely still in the early stages of exploiting AI-related expansion opportunities.
The company remains Berkshire’s largest holding, representing about 24% of its portfolio; However, Buffett and his team of analysts have made some eye-catching moves on the stock recently. Berkshire still owns three hundred million Apple shares, but has sold more than 615 million since the fourth quarter of 2023.
The relief in its position in Apple means that the investment conglomerate has missed out on billions in prospective earnings, yet the move sends a sign that Berkshire is lately taking a wary technique to the marketplace as a whole. So, even even although the AI revolution presents prospectively massive expansion opportunities, Buffett abandoning his value-driven roots.
Berkshire Hathaway initiated a position in Amazon (AMZN 0. 33%) in the second quarter of 2019, and Buffett has brazenly expressed remorse for not acting sooner. He even went so far as to call himself an “idiot” for not having accepted the tech giant’s career sooner.
With 0. 7% of Berkshire’s inventory portfolio, Amazon accounts for a small share. On the other hand, it would not be unexpected to see Berkshire seize a buying opportunity and, in particular, strengthen 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.
In addition to its market-leading online retail business, Amazon is also a leader in cloud infrastructure services. Its Amazon Web Services (AWS) segment has seen incredible growth over the past decade and consistently delivers fantastic margins to beneficiaries. So while e-commerce accounts for the majority of the company’s sales, it is AWS that generates the most profits for Amazon.
With AWS positioned as one of the go-to infrastructure facilities for building, deploying, and scaling AI applications, Amazon appears poised for strong sales and profit expansion along with the rise of synthetic intelligence. But investors shouldn’t have the transformative effect that that generation is about 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.
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, and Berkshire Hathaway. The Motley Fool has a disclosure policy.
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