Berkshire Hathaway CEO Warren Buffett has built an incredible track record of market-crushing returns by identifying high-quality companies that are worth investing in for the long term. Taking this approach to investing in the artificial intelligence (AI) revolution could prove hugely rewarding for retail investors as well.
If you're looking to score wins in the AI space, these three Buffett-backed stocks could help take your portfolio to the next level.
1. Apple
With a market capitalization of roughly $2.8 trillion, Apple (AAPL -0.35%) stands as the world's most valuable publicly traded company. It's also the largest stock position by far in the Berkshire Hathaway portfolio, accounting for about 47% of the investment conglomerate's total stock holdings.
While Apple has been somewhat secretive about its AI initiatives, it has some big advantages in the space. For starters, the tech giant has a massive base of users who love its mobile devices, computers, other hardware, software, and services.
That large and highly engaged user base provides it with a loyal group of customers eager to adopt new offerings within its ecosystem. It also provides the tech giant with a trove of valuable data that can be fed into artificial intelligence algorithms.
Apple continues to dominate the smartphone market and has been an early mover in the voice-based assistant space. If AI-powered personal assistants come to be a revolutionary new service category in the way that some tech luminaries and analysts are predicting, Apple could wind up being a big winner in the space.
2. Amazon
After sitting on the sidelines for years, Berkshire Hathaway finally opened a position in Amazon (AMZN 3.43%) in 2019. Buffett has said he regrets not buying into the e-commerce and cloud computing giant's growth story earlier.
Berkshire owns roughly $1.5 billion worth of Amazon stock -- a position that works out to about 0.4% of the investment conglomerate's total stock portfolio.
Artificial intelligence looks poised to play a huge role in Amazon's growth from here on out. Amazon Web Services has the leading share of the cloud infrastructure market and is a go-to destination when developers want to build, launch, and scale AI services. As more artificial intelligence applications are released and used, this will add to the demand tailwinds for Amazon's cloud offerings.
Artificial intelligence also has the potential to transform the company's e-commerce business. With AI opening the door for increased warehouse automation and packages being delivered by self-driving vehicles, Amazon's online retail business could see its margins and profitability soar.
3. Snowflake
These days, the vast majority of large organizations rely on services from different cloud providers. While multi-cloud setups have become the norm, they actually put substantial barriers in the way of combining and analyzing all the data those organizations generate. That creates some significant challenges.
Snowflake's Data Cloud platform helps organizations transcend the barriers between cloud-infrastructure platforms. In order to build and run high-performance AI applications, being able to access and analyze the biggest possible pool of relevant data is crucial. Snowflake's software makes that possible, and the company looks poised to play an important role in pushing AI forward.
For its fiscal 2024, which will end on Jan. 31, the company expects product revenue of $2.65 billion and a non-GAAP (adjusted) free cash flow margin of 27%. Jump ahead to the company's fiscal 2029, and Snowflake anticipates recording roughly $10 billion in sales and an adjusted free cash flow margin of approximately 30%.
While Berkshire Hathaway's Snowflake position accounts for just 0.3% of its stock portfolio, it has the potential to be one of the most explosive stocks owned by Buffett's company.
