Over the years, Berkshire Hathaway CEO Warren Buffett has made no bones about his difficulty understanding some of the world's latest technological innovations. The legendary investor had for years avoided technology stocks, saying he prefers "simple businesses," stating categorically, "If there's lots of technology, we won't understand it."
Despite those assertions, over the past few years, Buffett has accumulated a fortune in stocks on the cutting edge of artificial intelligence (AI).
Image source: The Motley Fool.
1. Apple -- $174 billion
Anyone who has followed Berkshire Hathaway won't be surprised to find that the company's most sizable AI stock holding is Apple (AAPL -0.35%). When including the shares held by subsidiary New England Asset Management (NEAM), Buffett's stake in Apple amounts to more than 915 million shares, worth roughly $174 billion.
Apple has long been at the forefront of AI technology. The company integrated its virtual digital assistant Siri into the iPhone 4S in 2011. That was the first of a long line of AI-driven features infused into the iPhone, supported by the Apple Neural Engine. This sophisticated neural processing unit (NPU) resides on the device, supporting all manner of AI functionality.
This includes the Face ID technology used to unlock the iPhone, the language recognition and processing that helps Siri better interact with users over time, and the image processor that helps improve photo quality in the camera. Many of Apple's health and safety features are also supported by AI, including the Apple Watch's fall detection, crash detection, and electrocardiogram (ECG) functionality.
While Apple has kept its generative AI aspirations close to the vest, CEO Tim Cook said on the company's third-quarter earnings call, "We view AI and machine learning as core fundamental technologies that are integral to virtually every product that we build." He went on to say, "We've been doing research across a wide range of AI technologies, including generative AI for years."
Apple has published a number of job postings this year for those with expertise in the field of generative AI. The company's history suggests Apple won't reveal its plans for using this technology until it's already deeply embedded in an as-yet-to-be-released product.
2. Amazon -- $1.47 billion
Berkshire Hathaway also holds a considerable stake in e-commerce denizen Amazon (AMZN 3.43%), though Buffett himself didn't initiate the purchase. The company holds 10 million shares, currently valued at nearly $1.47 billion.
Buffett said he's long been a fan and "always admired Jeff [Bezos]," Amazon's former CEO. In his usual self-deprecating manner, however, Buffett also admitted he should have invested in the company long ago, but didn't because "If I think something is going to be a miracle, I tend not to bet on it."
Amazon is a longtime innovator in the field of AI. The company has developed algorithms to recommend products, forecast demand, operate its fulfillment and logistics warehouses, and map out product delivery routes. The company also offers machine learning and generative AI tools via its industry-leading Amazon Web Services (AWS) cloud infrastructure service.
Amazon also pioneered an array of products infused with Alexa, its AI-driven virtual assistant. CEO Andy Jassy recently admitted the company is "investing heavily" in the large language models that form the foundation for generative AI.
3. Snowflake -- $1.05 billion
Data cloud and analytics provider Snowflake (SNOW 3.69%) is the last in Berkshire's trio of sizable AI holdings. In fact, Berkshire invested in the company even before its initial public offering (IPO), in a move instigated by Buffett lieutenant Todd Combs, who purchased more than 6 million shares, currently valued at roughly $1.05 billion. Combs is also CEO of wholly owned Berkshire Hathaway subsidiary GEICO, which is a longtime customer of Snowflake's data warehouse services.
According to Snowflake, its platform was "built from the ground up to support machine learning and AI-driven data science applications." The company also says it helps businesses "apply AI to make better decisions, improve productivity, and reach more customers." Most recently, Snowflake added support for the large language models that underpin the major generative AI systems. This allows users to deploy these systems directly within their Snowflake accounts.
Is it time to buy?
Buffett hasn't minced words about his love of Apple stock. At Berkshire's 2023 shareholder meeting in May, he said, "[Apple] just happens to be a better business than any we own." The iPhone continues to gain converts, controlling an estimated 60% share of the premium smartphone market for the second consecutive quarter, according to data compiled by Counterpoint Research. Add to that the company's consistent services growth and superior cash-flow generation, and it's easy to see why Apple is a Buffett favorite. Furthermore, at just 31 times earnings, Apple is selling at a discount to its historical valuation.
While Amazon experienced a fall from grace during the downturn, the company has seen its e-commerce business rebound. And despite last year's challenges, the company continued to control roughly 38% of the market in the U.S., more than the next 14 rivals combined. It's also the acknowledged leader of cloud infrastructure services, though competition continues to ramp up. Finally, it's the world's No. 3 provider of digital advertising services, behind just Alphabet's Google and Meta Platforms. And at just 2 times forward sales, Amazon is the cheapest of the bunch.
The riskiest of the three is Snowflake, as evidenced by its precipitous fall last year. While demand for the company's data storage and analytics services continues to grow, economic uncertainty has weighed on its recovery. Furthermore, the stock is still pretty pricey, selling for 16 times forward sales. However, for those with a stomach for volatility and a willingness to accept some additional risk for greater potential gains, Snowflake might be worth considering.
