38.3% of Warren Buffett’s $315 billion portfolio is invested in 3 artificial intelligence (AI) stocks

Under Warren Buffett’s leadership as CEO, Berkshire Hathaway (BRK.A -0.29%) (BRK.B 0.07%) the investment company has delivered a compounded annual return of 19.8% since 1965. That would have been enough to turn a $1,000 investment back then into a whopping $44.7 million today. By comparison, the same investment in S&P 500 it would have risen to just $338,311 over the same period. That’s why investors are closely monitoring Berkshire’s every move.

The conglomerate’s success stems from Buffett’s simple investment strategy: He likes companies with steady growth, robust profitability, strong management teams and shareholder-friendly initiatives such as share buyback programs and dividend schemes. One thing Buffett and his team not is to track the latest trend in the stock market, so you won’t find Berkshire piling into hot artificial intelligence (AI) stocks.

That said, three existing stocks in Berkshire’s $315 billion publicly traded portfolio are implementing AI in their legacy businesses in unique ways.

Image source: The Motley Fool.

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

E-commerce is Amazonhis (AMZN 1.06%) core business, but the company is also home to the world’s largest cloud computing platform, Amazon Web Services (AWS). Amazon is using AWS to build a dominant presence in the three core layers of AI:

1. Infrastructure: AWS designed its own data center chips for AI development. One of them is called Trainium, which offers up to 50% cost savings during the AI ​​training process compared to infrastructure powered by competing chips such as those provided by Nvidia.
2. Large language patterns (LLM): AWS has developed a family of LLMs called Titan. Companies can use them to accelerate the development of their own AI software applications. Titan LLMs are available on the Bedrock platform via AWS, along with a selection of other models from third-party AI start-ups such as Anthropic.
3. AI software: AWS offers a powerful AI virtual assistant called Q. It is capable of generating computer code to help developers speed up their software projects, and companies can also use it to extract valuable insights from their internal data.

But Amazon is also integrating artificial intelligence into its e-commerce segment. It has developed a virtual assistant called Rufus that can answer buyers’ questions and even help them compare products. In addition, Amazon launched Project Private Investigator in its fulfillment centers in the last second quarter of 2024, which uses artificial intelligence and computer vision to identify defective products before they are delivered to customers. This could be a huge cost saver in the long run as it will reduce the number of orders that are returned for refunds.

Berkshire bought Amazon shares in 2019, but Buffett has often expressed regret for not spotting the opportunity sooner. Still, as long as Berkshire continues to own the stock, it will likely benefit from Amazon’s rapidly growing presence in the AI ​​space.

2. Coca-Cola: 8.9% of Berkshire Hathaway’s portfolio

Coca cola (K.O 0.25%) is the world’s largest juice company and likes to experiment with technology to help improve efficiency, connect with customers and create new revenue opportunities. The company is now deploying AI in a variety of ways, and last year even named a “head of generative AI” to oversee its efforts.

So far, Coca-Cola has used artificial intelligence to create marketing campaigns and even design a promotional version of its flagship soda. Coca-Cola Y3000 captures what the drink might look like in the year 3000, using AI to analyze mountains of customer data.

But in April, Coca-Cola made its biggest AI commitment to date. He agreed to spend $1.1 billion MicrosoftAzure AI cloud services platform over five years to help improve workplace productivity, supply chains, marketing and more.

Berkshire spent $1.3 billion building its stake in Coca-Cola between 1987 and 1994 and never sold a single share. That position is now worth $28 billion. Additionally, Berkshire is on track to earn $776 million in dividend payments from the beverage giant this year alone.

While Buffett couldn’t have predicted the AI ​​revolution back then, his investment conglomerate stands to reap substantial rewards if the technology generates more revenue and earnings for Coca-Cola.

3. Apple: 28.8% of Berkshire Hathaway’s portfolio

Apple (AAPL 1.84%) is the world’s largest company with a market capitalization of $3.4 trillion. The company is releasing Apple Intelligence software, which it developed in partnership with OpenAI to bring AI to the latest generation of iPhones, iPads and Mac computers.

Apple Intelligence can interpret messages and emails and compose responses on command. It can also summarize content with one tap and prioritize notifications based on what’s important to each individual user. In addition, Apple Intelligence will provide the voice assistant Siri with the knowledge and capabilities of the OpenAI ChatGPT app, making it more useful than ever.

Apple Intelligence will use Apple’s latest chips, including the A18 Pro (for iPhone) and the new M4 (for iPad and Mac computers), which have been specifically designed in-house to process AI workloads. They allow AI functions to run on the device, which creates a faster user experience because they don’t have to send requests to external data centers for processing.

Berkshire spent about $38 billion buying Apple stock between 2016 and 2023. Earlier this year, that position was worth more than $170 billion, which represented nearly half of the conglomerate’s entire stock portfolio (by value). However, Berkshire sold 13 percent of its stake in the first quarter, which Buffett said was for tax reasons, and then sold 49 percent of the remaining position in the second quarter.

The giant selloff may reflect Buffett’s cautious view of the stock market as a whole, as the S&P 500 is currently trading at a price-to-earnings ratio of 28.2, which is 55% more expensive than its long-term average of 18.1. Berkshire now has a record $277 billion in cash, so Buffett and his team could expect to pounce in the event of a market correction.

However, Apple remains Berkshire’s largest holding company, so the conglomerate will still benefit if Apple Intelligence pushes consumers to upgrade to the latest devices to access its features.