29.5% of Warren Buffett’s $305.7 billion portfolio is invested in 2 artificial intelligence (AI) stocks

Warren Buffett was at the helm Berkshire Hathaway (BRK.A -0.00%) (BRK.B 0.04%) investment company since 1965. During his 59 years at the helm, Berkshire Hathaway shares have delivered a compounded annual return of 19.8%, which would have been enough to turn a $1,000 investment back then into more than 42.5 million dollars today.

Buffett’s investment strategy is simple. He looks for growing companies with robust profitability and strong management teams, and particularly likes those with shareholder-friendly programs such as dividend payments and stock buyback plans.

Just one thing, Buffett not concentration is the latest trend in the stock market, so you won’t find him now raising money in artificial intelligence (AI) stocks. However, two stocks Berkshire already owns are becoming major players in the AI ​​industry and account for about 29.5% of the conglomerate’s $305.7 billion portfolio of publicly traded stocks and securities.

Image source: The Motley Fool.

1. Apple: 28.9% of Berkshire Hathaway’s portfolio

Apple (AAPL 0.04%) is the world’s largest company with a market capitalization of $3.3 trillion, but it was worth a fraction of that when Buffett began buying shares in 2016. Between then and 2023, Berkshire has spent about 38 billion building his stake in Apple, and thanks to a stunning return, that position was worth more than $170 billion earlier this year.

However, Berkshire has sold more than half of its stake in the iPhone maker in recent months. The remaining position is still worth $88.3 billion, so it’s still the largest holding in the conglomerate’s portfolio, and I think the recent selloff reflects Buffett’s cautious view of the broader market, as opposed to Apple itself. after all S&P 500 it trades at a price-to-earnings (P/E) ratio of 27.6 right now, which is significantly more expensive than its 1950s average of 18.1.

In addition, Apple is preparing for one of the most important periods in its history. With more than 2.2 billion active devices globally — including iPhones, iPads and Macs — Apple could become the world’s largest consumer AI distributor.

The company unveiled Apple Intelligence earlier this year, which it developed in partnership with ChatGPT creator OpenAI. It’s built into the new iOS 18 operating system and will only be available on the latest iPhone 16 and earlier iPhone 15 Pro models, as they are equipped with next-generation chips designed to process AI workloads.

Given that Apple Intelligence will transform many of the company’s existing software applications, it could trigger a large upgrade cycle for the iPhone. Apps like Notes, Mail and iMessage will include new writing tools capable of summarizing and instantly generating text content on demand. In addition, Apple’s existing Siri voice assistant will be enhanced by ChatGPT, which will strengthen its knowledge base and capabilities.

Although Apple’s revenue growth has been sluggish in recent quarters, the company still ticks almost all of Buffett’s boxes. It’s very profitable, has an incredible management team led by CEO Tim Cook, and returns a lot of money to shareholders through dividends and buybacks — in fact, Apple recently launched a new $110 billion share buyback program that is the largest stock buyback program. in American corporate history.

There’s no guarantee that Berkshire is done selling Apple stock, but the rise of artificial intelligence will likely drive a renewed phase of growth for the company, so that’s a good reason to remain bullish no matter what Buffett does.

2. Amazon: 0.6% of Berkshire Hathaway’s portfolio

Berkshire bought a relatively small stake Amazon (AMZN 2.34%) in 2019, which is currently worth $1.7 billion and represents just 0.6% of the conglomerate’s portfolio. However, Buffett has often expressed regret that he did not recognize the opportunity much earlier as Amazon expanded beyond its roots as an e-commerce company and now has a dominant presence in streaming, digital advertising and cloud computing.

Amazon Web Services (AWS) is the world’s largest business-to-business cloud platform, offering hundreds of solutions designed to help organizations operate in the digital age. But AWS also wants to be the provider of AI solutions for businesses, which could be its biggest financial opportunity yet.

AWS has developed its own data center chips such as Trainium, which can offer cost savings of up to 50% compared to competing hardware from vendors such as Nvidia. Additionally, the cloud provider has also built a family of large language models (LLMs) called Titan that developers can use if they don’t want to create their own models. These are accessible through Amazon Bedrock, along with a portfolio of third-party LLMs from AI start-ups such as Anthropic. LLMs are the foundation of any AI chat bot application.

Finally, AWS now offers its own AI assistant called Q. Amazon Q Business can be trained on an organization’s data so that employees can instantly find answers to their questions, and it can also generate content to increase productivity. Amazon Q Developer, on the other hand, can debug and generate code to help speed the completion of software projects.

According to consulting firm PwC, artificial intelligence could add $15.7 trillion to the global economy by 2030, and the combination of chips, LLMs and software applications will help Amazon claim this enormous pie.

Amazon was consistently losing money when Berkshire bought the stock, and it doesn’t pay a dividend or have a share buyback program, so it doesn’t tick many of Buffett’s boxes (hence the small position). But it might be the most diverse AI stock investors can buy right now, and Berkshire will likely be happy with the long-term returns here, even if Buffett wants a bigger stake.