Warren Buffett is arguably the most successful investment manager in history. Since 1965, he has steered his conglomerate, Berkshire Hathaway (BRK.A -0.76%) (BRK.B -0.69%), to average annual returns of 19.8% per year, twice the average annual return of the benchmark S&P 500 index. Over the course of 58 years, that kind of outperformance gets compounded each year and has made Buffett (and every other long-term Berkshire stockholder) very rich.
Today, Berkshire Hathaway owns a portfolio of 56 publicly listed stocks and securities worth $352 billion, as well as dozens of wholly owned companies under the conglomerate's umbrella. Overall, it's valued at a whopping $803 billion.
Buffett's success can be attributed in part to his long-term approach to investing, and his focus on companies generating steady growth and consistent profits. He certainly wouldn't describe himself as a technology expert, let alone an expert on emerging technologies like artificial intelligence (AI).
Yet, many of the high-quality companies in Buffett's portfolio know they have to stay abreast of the wave of new technologies or risk being left behind. Therefore, they have begun using AI in a variety of ways -- and some of them might surprise you.
Here are seven AI stocks Buffett and Berkshire are currently holding.
Image source: The Motley Fool.
1. Apple
Apple (AAPL -0.35%) is the world's largest public company with a valuation of $2.8 trillion, and since it operates in the tech sector, a foray into AI was practically inevitable. In fact, Apple has been developing AI for years. It's behind the autocorrect function on all of its devices, and it also curates content for users inside applications like Apple Music. Its voice assistant, Siri, is also a product of AI.
Apple now develops its own computer chips to power its products, and the freshly launched iPhone 15 features the company's newest A17 Pro CPU processor. It's the only smartphone in the world with a chip manufactured using the 3nm process node, and it accelerates predictive processes on the device when using the keyboard, the camera, and Siri, to name just a few actions. In other words, Apple has created the world's most powerful AI chip for mobile devices.
Berkshire Hathaway's stake in Apple has grown to account for 45.5% of the value of its $352 billion portfolio, and while AI isn't the reason Buffett likes it so much, he is sure to benefit significantly as the company ramps up its efforts in the space.
2. American Express
Credit card providers are natural targets for fraudsters, and American Express (AXP -0.62%) has been using AI to fight them for years. In fact, in 2020, after a decade of development, the company believed it had produced the world's largest and most advanced machine learning system in the financial services industry.
Today, its AmEx Digital Labs division experiments with consumer-facing services powered by generative AI. Earlier this year, the company acquired virtual travel assistant Mezi, an AI chatbot platform designed to help people book vacations. Its technology has since been repurposed to power several features at American Express, like its virtual assistant, AskAmex.
American Express is a Buffett favorite; its stock makes up 7% of Berkshire's portfolio, which means it's the third-largest holding.
3. Snowflake
The cloud computing industry continues to grow rapidly, much to the benefit of service providers like Snowflake (SNOW 3.69%). The cloud is where many companies store their valuable data, and since AI has to be trained on mountains of data, it's also where developers are building and deploying the technology.
Snowflake has spent years helping businesses aggregate their data in its data cloud to improve visibility. Now, Snowflake is preparing its customers for a world powered by AI. The company recently opened a private beta test of its new Document AI tool, which will allow businesses to query unstructured data like text in a legal contract or an invoice, for example. This will rapidly accelerate analytics for professionals outside of the programming field.
Plus, Snowflake has acquired several small AI companies to bolster its portfolio of services. Neeva is one of them; it designed a search tool that businesses can use to engage with their data using natural language instead of programming language. That means more non-technical employees can benefit from the insights Snowflake delivers.
Snowflake stock only accounts for 0.3% of Berkshire's $352 billion portfolio, but it's on the front lines of the AI trend.
4. Amazon
Most people know Amazon (AMZN 3.43%) for its e-commerce platform, but it's also home to the world's largest cloud computing platform, Amazon Web Services (AWS). The company is using AWS to build a presence in three key areas of AI:
- First, Amazon is developing its own data center chips to rival Nvidia's, though that's easier said than done.
- Second, it offers a portfolio of large language models to businesses as a service. Those models are incredibly expensive to develop, so ready-made solutions give businesses a head start in developing AI applications.
- Finally, Amazon offers generative AI tools like CodeWhisperer, which is effectively a finished AI product that developers can use to speed up software development.
Berkshire Hathaway has held a stake in Amazon since 2019, but Buffett has often expressed regret for failing to recognize its potential sooner. Nonetheless, the investing legend is now positioned to benefit from the company's AI prowess.
5. Bank of America
That's right, even boring old banks are using AI. Bank of America (BAC -0.21%) is applying the technology in a number of ways, from transforming customer experiences to reducing costs.
The bank launched an AI-powered virtual assistant called Erica in 2018, and its CEO Brian Moynihan says Erica has since spent 10 million hours conversing with customers. In that time, it has logged a whopping 1.5 billion interactions that might have otherwise necessitated a phone call with a customer service representative or a visit to a branch. Not only is Erica a convenience for customers, it also saves Bank of America money on support staff.
Bank of America is Berkshire's second-largest stock holding, making up 8.5% of its portfolio. The firm opened its position in the bank in 2007, and it has continued to buy more shares, even as recently as this year.
6. General Motors
The automotive industry is rapidly changing. Legacy manufacturers like General Motors (GM 0.48%) need to keep up with new, high-tech players like Tesla, which is working on all sorts of AI projects, from self-driving vehicle software to humanoid robots.
In August, GM expanded its partnership with Alphabet to help the car maker embed AI across its business. The two have worked together in the past on GM's in-car virtual assistant, which is powered by Google's conversational AI technology.
GM is also the owner of Cruise, an autonomous vehicle start-up that now operates driverless ride-hailing services in seven major U.S. cities. That bet could prove critical over the long term as GM navigates an increasingly competitive landscape dominated by technology.
But it appears Berkshire's confidence in GM is at a low point because the firm has sold more than half of its stake in it this year alone. The automaker now represents just 0.2% of the investment fund's portfolio.
7. Coca-Cola
If you're anything like me, you've probably never considered tasting AI. But the world's largest beverage company just used the technology to design a new drink. That's right, Coca-Cola (KO) wanted to know what its namesake soda might taste like in the year 3000, so it asked an AI for its answer to that question.
The drink is called Coca-Cola Y3000 Zero Sugar, and it was formulated by feeding data into an AI model, which included how soda fans imagine the future through emotions, colors, and flavors. But that's just the tip of the AI-iceberg for Coca-Cola. In June, the company appointed a global head of generative AI, which signals how important it believes the technology will become for it.
Marketing and advertising will be one of Coca-Cola's big AI focus points. The company launched a campaign called Masterpiece earlier this year, featuring a 2-minute video created using a mix of real actors and AI.
Coca-Cola's AI experiment is just beginning, and Buffett might soon be glad he owns $23.1 billion worth of its stock, representing 6.6% of Berkshire's portfolio.
