This Is The Best Artificial Intelligence (AI) Stock Warren Buffett Owns (Hint: It’s Not Apple)

Artificial intelligence (AI) is all the rage these days. Wall Street’s top investors have taken notice and are racing to acquire shares of some of the industry’s biggest players.

Warren Buffett may not share the same enthusiasm as many investors and analysts. After being in the investment world for decades, it’s hard to impress the Oracle of Omaha. However, the conglomerate he presided over, Berkshire Hathaway (BRK.A -1.17%) (BRK.B -1.27%)owns shares in at least a few companies that have made key moves in AI, including Buffett’s longtime favorite business (besides his own): Apple (AAPL 1.16%).

However, the title of “best AI stock” in Berkshire Hathaway’s portfolio goes to it Amazon (AMZN 2.77%). Here’s why.

Amazon versus Apple

Apple recently announced a suite of AI-related features that will be available to its customers, at least those who own some of the latest devices — think iPhone 15 Pro and above. It will also integrate ChatGPT into some of its devices, including its digital assistant, Siri.

These announcements have been a long time coming. Apple has been perceived as lagging behind other tech leaders in the AI ​​race, including Amazon. The e-commerce specialist has been busy. Amazon has launched services like Bedrock that help companies develop generative AI applications without deep coding knowledge.

Amazon offers a number of AI-related services — including Bedrock — through its cloud computing arm, Amazon Web Services (AWS). The list also includes Amazon Q, a GenAI assistant, Transcribe, which converts text to speech, and Translate, which does what its name suggests.

AI is impacting AWS revenue growth. In the second quarter, Amazon’s net sales rose 10% year over year to $148 billion. AWS revenue grew nearly 19% year-over-year to $26.3 billion. Management attributed AWS’s strong performance to three factors, one of which was AI.

Andy Jassy, ​​CEO of Amazon, says: “Our AI business continues to grow dramatically, with a multi-billion dollar revenue rate despite it being such early days. But we can see in our results and conversations with customers that our unique approach and offerings are resonating. with customers.”

Amazon is not finished. In a move that could put him in a bit of competition with the high-flyers NvidiaAmazon designs its own AI chips. The company believes customers will benefit from custom options that are cheaper than what market leader Nvidia offers. How will this move affect Amazon’s financial results? It’s a bit early to tell. However, the company’s entire body of work in AI is far more advanced and comprehensive than Apple’s.

More reasons to buy

Amazon does not feature prominently in Berkshire Hathaway’s portfolio. The conglomerate owned just 10 million Amazon shares in the second quarter. That sounds like a lot in a vacuum, but for comparison, he also owned 400 million Apple shares. Still, for investors who want a stock that’s owned by Warren Buffett’s Berkshire Hathaway and a leader in AI, Amazon is a better option than Apple.

However, Amazon is not just a piece of artificial intelligence. AWS offers many services that are not related to artificial intelligence. It’s been Amazon’s most profitable segment for years, and there’s still plenty of room for growth in the cloud computing industry.

Amazon’s e-commerce business is not a particularly high-margin one. However, it benefits from a strong moat due to switching costs and network effect. It also allows the company to generate billions in advertising. In addition, Amazon is a leader in video and music streaming. And it has long sought to make waves in the healthcare industry.

Given Amazon’s track record and ability to generate consistent earnings and cash flow, investors should expect the company to successfully discover more significant growth avenues beyond those it already has, as it has -o in the past.

There are many more years of market gains ahead for Amazon.