Over the years, Berkshire Hathaway (BRK.A 0.70%) (BRK.B 0.85%) CEO Warren Buffett hasn't minced words about the difficulty he has wrapping his mind around complicated technology. In fact, for years, the legendary investor avoided technology stocks altogether, saying he prefers "simple businesses," going on to say, "If there's lots of technology, we won't understand it."
Yet for all his protestations, in recent years, Buffett has amassed a veritable fortune in stocks that stand to gain from advances in artificial intelligence (AI).
Image source: The Motley Fool.
An Apple a day...
It shouldn't come as a surprise that Berkshire's biggest bet on AI comes courtesy of Apple (AAPL -0.90%). When combined with the shares held by Berkshire's wholly owned subsidiary New England Asset Management, Buffett's stake in Apple amounts to more than 915 million shares, worth an eye-popping $164 billion.
Apple is no stranger to AI technology, installing Siri on its iPhone in 2011, the first such integration of a voice-command digital assistant onto a smartphone.
And that was just the beginning. The iPhone is now rife with AI-fueled features, underpinned by the Apple Neural Engine. This on-device AI processor supports facial ID to unlock the device, natural language processing to help Siri better understand the user, as well as supporting Apple's innovative computational photography features.
The AI also supports several health and safety features, including electrocardiogram functionality, as well as fall and crash detection.
Thus far, however, Apple has been largely mum on the subject of generative AI, the technology behind ChatGPT. During the company's recent earnings call, CEO Tim Cook said, "The potential is certainly very interesting." He added that while Apple doesn't comment on product road maps, "it's very important to be deliberate and thoughtful in how you approach these things."
Numerous reports suggest the company is looking to hire experts in generative AI. Given Apple's penchant for secrecy, there's probably more going on behind the scenes. This likely isn't the last you'll hear about generative AI from the company.
An e-commerce and cloud pioneer
While Buffett himself didn't instigate the purchase, Berkshire Hathaway has a sizable stake in Amazon (AMZN -1.42%), with more than 10 million shares currently valued at more than $1.2 billion.
Buffett has praised founder Jeff Bezos, saying he has admired Bezos "for a long, long time," but "didn't think he'd succeed on the scale that he has."
Amazon has long used AI to make personalized product recommendations to users, predict demand for its inventory, aid its massive fulfillment and logistics operation, and speed up deliveries. The company also offers AI and machine learning via Amazon Web Services, its cloud computing operation.
The company was the first to debut a range of products infused with an AI-powered virtual assistant, helping make Alexa a household name. CEO Andy Jassy recently revealed that Amazon is "investing heavily" in the large language models that underpin generative AI.
A special little Snowflake
Data warehouse and analytics specialist Snowflake (SNOW 0.20%) rounds out the top three AI holdings for Berkshire Hathaway. Buffett lieutenant Todd Combs initiated the purchase: more than 6 million shares, currently worth more than $1 billion. Combs, who is also CEO of Geico, which is owned by Berkshire Hathaway, had used Snowflake's data warehouse with the company's insurance operations.
Snowflake says its platform was "built from the ground up to support machine learning and AI-driven data science applications." The company says it helps businesses "apply AI to make better decisions, improve productivity, and reach more customers." The platform also helps companies gather data from disparate sources, allowing for more-useful analysis.
Should investors add these AI stocks to their buy list?
Buffett has been quite clear about his opinion of Apple. In fact, at Berkshire's 2023 shareholder meeting last month, the legendary investor said of Apple, "It just happens to be a better business than any we own."
Given the continuing demand for the iPhone, its impressive services growth, and its superior cash generation, Apple is as close to a no-brainer as one can get in investing. Plus, I have previously said that if I could own just one Buffett stock, Apple would be it.
It's also hard to bet against Amazon. The company dominates the e-commerce industry, controlling roughly 38% of the market in the U.S., more than the next 14 rivals combined. It's also the undisputed leader in the cloud computing industry, with a market share that's nearly as large as Microsoft Azure and Alphabet's Google Cloud combined. And it has also become the world's third-largest digital advertiser, behind just Google and Meta Platforms. I think now is the time to buy Amazon before the inevitable stock price recovery.
That leaves Snowflake. I'm a fan of the company and owner of the stock, but Snowflake is a much riskier and more volatile proposition than either Apple or Amazon. The company's data storage and analytics services are still in high demand, but growth is slowing. Its recent fall from grace made the stock's frothy valuation much more palatable.
For those willing to take a little additional risk for the potential of greater gains, Snowflake might still be worth a look.
