Artificial intelligence (AI) is a game-changing technology that could have a greater impact on the economy than the internet or the smartphone. Generative AI's ability to generate text, images, videos, and even computer code could drive a productivity boom unlike anything businesses have ever seen.
Investors are excited. They have sent AI stocks like Nvidia soaring this year, but one investing titan is saying maybe it's time to pump the brakes.
Charlie Munger is the vice chairman of the Berkshire Hathaway (BRK.A -0.76%) (BRK.B -0.69%) investment company, and he has worked alongside the legendary Warren Buffett since the 1970s. At a recent conference, Munger reportedly said AI is getting a "huge amount of hype ... probably more than it deserves." He noted that AI has been around for a long time, and he expressed skepticism about the technology's ability to achieve monumental things like, for instance, curing cancer in the near term.
Even with that skepticism, Berkshire's $345 billion portfolio of publicly traded stocks and securities currently owns a stake in several companies using AI to supercharge their businesses, even though Munger and Buffett didn't necessarily buy them for that reason and perhaps weren't the people who decided to make the purchase. Below, I'll share eight of the investment firm's AI stocks.
Image source: Getty Images.
1. Apple: 47.2% of Berkshire's portfolio
Apple (AAPL -0.35%) might produce some of the most popular consumer devices, from the iPhone to the Mac computer, but it's also a force in AI, even if the company doesn't outright promote itself as such.
Apple designs its own chips, which are fundamental to AI. The A17 Pro CPU chip inside the new iPhone 15 is capable of rapidly processing AI workloads like predictive text and the Siri voice assistant. Remarkably, it all happens on-device rather than in the cloud, which is testament to how powerful the company's chips have become.
But that's not all. Several of Apple's native mobile applications rely on AI, including the camera and Apple Music, which uses the technology to curate personalized playlists.
Almost half of Berkshire's $345 billion portfolio is invested in Apple, so the investment company is likely to become a huge beneficiary of AI over the long term.
2. Bank of America: 8.1% of Berkshire's portfolio
Investors might not associate banking with AI, but the technology is making a notable impact on the institutions willing to adopt it. In 2018, Bank of America (BAC -0.21%) launched an AI chatbot called Erica, which was designed to handle customer queries and reduce strain on the bank's physical branches and call centers.
Erica has logged 1.5 billion interactions with customers since then, and as it continues to grow more sophisticated, Bank of America will likely save an increasing amount of money on support staff. In September, the bank decided to expand on Erica's success by integrating the same technology into its CashPro digital banking platform for business clients. It will reduce friction on CashPro by allowing customers to quickly access transaction records and find information about their accounts.
The normally slow-moving banking sector could be a substantial beneficiary of AI over the long term, and again, Berkshire stands to reap the rewards as Bank of America stock is the firm's second-largest holding.
3. American Express: 6.6% of Berkshire's portfolio
Credit card companies have been fighting fraud since (almost) the dawn of time. As one of the largest players in the industry, American Express (AXP -0.62%) understands the importance of technology in that ongoing battle.
In 2020, it launched an advanced machine learning system to weed out fraud after a decade of development. The company said it was the world's largest model of its kind at the time. More recently, the AmEx Digital Labs division within American Express has been experimenting with generative AI tools to improve customer experience. It has a virtual assistant called AskAmex that is powered by Mezi, a generative AI company focused on the travel sector, which American Express acquired back in 2018.
American Express tends to attract more affluent consumers, and it is possible AI will play a greater role in concierge services in the future to help the credit card giant fill customers' needs more quickly. But the technology will always feature prominently in the background as fraud becomes more sophisticated. With 6.6% of Berkshire's portfolio value in American Express, that translates to a whopping 20% ownership stake in the company.
4. Coca-Cola: 6.2% of Berkshire's portfolio
This one might come as a surprise, but there is plenty of interest in AI at the world's largest beverage company. In June, Coca-Cola (KO) appointed a global head of generative AI, which is a clear sign the company plans for the technology to play a key role in its future.
Coca-Cola just launched a new promotional soda called Coca-Cola Y3000 Zero Sugar, which was formulated with the help of AI. The company gathered data on how customers imagined the future -- it included colors, flavors, and emotions -- and then fed the information into an AI model. The goal was to replicate what Coca-Cola might taste like in the year 3000, but since none of us will be around then, we'll leave it to future generations to digest the results.
Coca-Cola also used AI to design a marketing campaign called Masterpiece recently, featuring a video created with a mix of real and AI-generated content. Those initiatives will likely expand in scope in the future, and Berkshire might be glad it owns $21.6 billion worth of the company's stock.
5. BYD Co.: 0.9% of Berkshire's portfolio
BYD Co. (BYDDY 4.08%) is based in China, and it's one of the world's largest electric vehicle manufacturers. It makes everything from electric buses to forklifts to passenger vehicles.
The company uses Nvidia's DRIVE platform to power autonomous self-driving capabilities in its cars, which includes all of the necessary hardware and software. While BYD isn't sold on developing competing technologies in-house, it is focused on integrating AI and automation into its production processes, which could drive substantial value.
The company is also experimenting with autonomous driving for its forklifts, which likely poses less risk and liability compared with putting passenger cars on public roads. For now, it appears BYD is likely to implement AI around the edges of its business rather than making it a central focus. Nonetheless, Berkshire will benefit from any success that strategy brings thanks to its position in BYD stock, which represents 0.9% of the firm's portfolio.
6. Amazon: 0.4% of Berkshire's portfolio
Amazon (AMZN 3.43%) is one of Berkshire's most direct AI investments, even though the firm first bought the stock in 2019, before the technology took hold. Amazon is home to the world's largest cloud computing platform, Amazon Web Services (AWS), and it's racing to build its portfolio of AI products and services.
AWS has designed its own chips, and it's also developing large language models its business customers can use and build upon. Amazon is also fresh off a $4 billion investment into leading generative AI start-up Anthropic, which will help accelerate its progress across the AI stack.
Since AI is developed, trained, and deployed in the cloud, Amazon could be one of Berkshire's most important investments in this industry -- even if it only represents 0.4% of the firm's portfolio right now.
7. Snowflake: 0.3% of Berkshire's portfolio
Snowflake (SNOW 3.69%) might be considered another direct AI investment. It's an innovative leader in the cloud computing industry, helping thousands of businesses aggregate their data using its Data Cloud platform for maximum visibility and powerful analysis. Now, it's investing heavily in bringing more AI tools to its customers.
Snowflake has acquired several small AI start-ups to accelerate its initiatives. One of them is Neeva, which developed a search tool designed to help everyday users find critical information using natural language instead of programming language. That means more employees can draw useful insights from an organization's data, as opposed to technical staff alone.
Snowflake also launched a new tool called Document AI to help businesses extract important information from unstructured data sets in contracts and invoices, for example. Professionals like lawyers and accountants could experience a productivity explosion thanks to that technology.
Snowflake is a tiny piece of Berkshire's portfolio, representing just 0.3% of its value, and the company is still losing money, making it one of the riskier plays the company is holding.
8. General Motors: 0.2% of Berkshire's portfolio
The automotive industry could be another major beneficiary of AI, and legacy manufacturers like General Motors (GM 0.48%) are racing to keep up with the technological advancements of new competitors like Tesla.
GM owns Cruise, a start-up developing autonomous vehicles which already operate in at least three major U.S. cities. Self-driving technology, which is powered by AI, has the potential to change the future of human mobility.
GM is also working with Google parent Alphabet to implement AI across its business. Google's conversational AI already powers the in-car voice assistant in GM's vehicles.
Berkshire has sold more than half of its stake in GM in 2023, which doesn't inspire much confidence. Its remaining position represents just 0.2% of the firm's portfolio.
