Warren Buffett has managed the Berkshire Hathaway (NYSE: BRK.A) (BRK.B 1.09%) investment company since 1965. Over that 59-year stretch, he steered the conglomerate to average annual returns of 19.8%, which is nearly twice the average annual return delivered by the S&P 500 index over the same period.
In dollar terms, $1,000 invested in Berkshire stock in 1965 would have grown to $43 million by the end of 2023. The same investment in the S&P 500 would have been worth a mere $312,230.
Buffett likes to buy stock in companies with steady growth, consistent profitability, solid management teams, and shareholder-friendly initiatives like dividend schemes and stock buyback programs. One thing Buffett doesn't do is chase the latest stock market trend, so you won't find him piling into artificial intelligence (AI) stocks just because they are generating the best returns right now.
That said, at least six of the 47 stocks already in Berkshire's $410 billion portfolio of publicly traded securities now use AI in some capacity. Here's a look at each company and what they're up to in AI.
Image source: The Motley Fool.
1. Apple: 44.8% of Berkshire Hathaway's portfolio
Apple (AAPL +0.00%) is Berkshire's largest position. The conglomerate spent about $38 billion accumulating shares since 2016, and the position is now worth $184 billion -- even after Berkshire sold 13% of its stake for tax reasons earlier this year. Apple makes some of the world's most popular consumer devices led by the flagship iPhone, and it could soon be one of the biggest players in AI.
Apple just revealed its Apple Intelligence software, which it developed in partnership with ChatGPT creator OpenAI. It's expected to go live in September alongside the new iOS 18 operating system, and it will overhaul many of the company's existing software products.
The Siri voice assistant will be powered by ChatGPT, and users will be able to read a summary of their emails in the Mail application with a single tap. Apple Intelligence can also transcribe audio recordings, which means users can spend less time typing.
There are more than 2.2 billion Apple devices worldwide, so the company could become the largest distributor of AI to consumers. Some analysts on Wall Street expect the upcoming iPhone 16 to drive a big upgrade cycle because it's rumored to come with a powerful new chip designed specifically for processing AI workloads.
NASDAQ: AAPL
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2. Bank of America: 10.5% of Berkshire Hathaway's portfolio
Berkshire first bought shares in Bank of America (BAC 0.32%) in 2007, and it's now the conglomerate's second-largest holding.
Investors probably don't associate banking with cutting-edge technology, given it's such a slow-moving industry. But Bank of America was an early adopter of AI, launching its AI assistant called Erica way back in 2018. Erica can remind customers about upcoming bills, locate historical transactions, and even offer ideas for saving money and reducing debt.
Over the last six years, Erica has logged more than 2 billion interactions with customers, and adoption is accelerating. Bank of America recently introduced Erica to its business clients who use the CashPro platform, and the chatbot is already solving 43% of inquiries autonomously with no human intervention.
AI tools like Erica are likely to shrink the human workforce for banks, especially in their customer service departments, and those cost savings can translate into much higher earnings.
3. Coca-Cola: 6.1% of Berkshire Hathaway's portfolio
Last year, Coca-Cola (KO 0.91%) allowed generative AI to formulate a new drink called Coca-Cola Y3000. The AI model used customer data to predict what the popular beverage might taste like in the year 3000. It was a great marketing stunt that showcased Coca-Cola's progressive approach to technology, and the company even hired a "head of generative AI" in 2023.
The company recently signed a five-year deal with Microsoft, committing to spend $1.1 billion on the Azure cloud platform and its generative AI services. Coca-Cola will use Azure to weave AI throughout its entire organization, enhancing everything from marketing to manufacturing to the supply chain.
Berkshire spent $1.3 billion accumulating 400 million shares in Coca-Cola between 1987 and 1994. It never sold a single one, and that position is now valued at $25.1 billion. Plus, Berkshire will collect $776 million in dividend payments from Coca-Cola this year alone, which highlights the powerful effects of compounding over the long term.
NYSE: KO
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4. Visa: 0.5% of Berkshire Hathaway's portfolio
Visa (V 1.17%) has more than 4.4 billion cards in circulation worldwide, making it the largest issuer in the industry. Visa doesn't lend any money; it simply operates a payments network, which means it earns a steady stream of fees that grows as more merchants and consumers enter its ecosystem. It's right in the wheelhouse of a patient long-term investor like Buffett, which is why Berkshire has owned the stock since 2011.
Visa is constantly battling fraud, which includes highly automated enumeration attacks that use bots to exploit network vulnerabilities. The company just launched a new AI-powered tool for its Visa Account Attack Intelligence (VAAI) platform, which autonomously identifies and assigns a score to enumeration attacks so banks can make more informed decisions on when to block transactions on behalf of customers.
But that's not all. Visa's new Stand-In Processing tool steps in when banks suffer outages or network disruptions, using AI to approve and decline transactions so services can continue for customers without interruption.
Visa processed over 72 billion transactions in the last quarter alone, and with that much volume and data, automation is essential. Therefore, investors should expect this company to push the boundaries of innovation when it comes to AI.
5. Amazon: 0.5% of Berkshire Hathaway's portfolio
Berkshire bought Amazon (AMZN +2.02%) stock in 2019, but Buffett often expresses regret for not identifying the opportunity much earlier. Amazon has expanded beyond its roots in e-commerce and now operates in video streaming, digital advertising, cloud computing, and AI.
The Amazon Web Services (AWS) cloud division is investing heavily in AI. It developed its own chips, its own large language models (LLMs), and even its own applications, all of which are available to businesses and developers who can use them to either create their own AI products or drive efficiency in their day-to-day operations.
Amazon also uses AI to power the recommendation engine on Amazon.com. It learns what customers like so it can show them more of those products to boost sales. Plus, merchants can use Amazon's AI software to create product pages with engaging descriptions and images.
Amazon just entered the exclusive $2 trillion club, and there could be plenty of long-term upside ahead thanks to AI.
NASDAQ: AMZN
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6. Snowflake: 0.2% of Berkshire Hathaway's portfolio
Snowflake (SNOW 8.42%) doesn't fit Buffett's usual criteria. The cloud computing company is growing, but it's a long way from achieving profitability, and it doesn't return any money to shareholders. Berkshire bought Snowflake around the time of its IPO in 2020, and one of Buffett's lieutenants likely made the decision.
Snowflake's data cloud helps organizations aggregate their data even if it's spread across multiple cloud platforms, eliminating silos and enabling more effective analysis. The company launched Cortex AI last year, which gives businesses the tools to develop AI models using a mixture of their own data and ready-made LLMs.
Cortex AI also includes several AI-powered tools. The Copilot chatbot understands natural language and can offer assistance across Snowflake's platforms, and Document AI allows developers to rapidly extract valuable data from unstructured sources like contracts and invoices.
Snowflake is in a great position to thrive in the world of AI, but investors should tread cautiously because its stock is very expensive.
