When it comes to widely followed Wall Street money managers, Berkshire Hathaway's (BRK.A 0.24%)(BRK.B 0.38%) CEO Warren Buffett is in a class of his own. In the roughly six decades since taking the reins, the aptly named "Oracle of Omaha" has overseen an aggregate return in his company's Class A shares (BRK.A) of around 5,422,200%, which blows the cumulative total return (including dividends) of 38,751% for the benchmark S&P 500 over the same timeline out of the water.
Considering how much Buffett has outperformed the broader market, it's not uncommon for investors to mirror his trades. This can be done by tracking Berkshire's quarterly filed Form 13F, which provides a snapshot of which stocks Buffett and his team have been buying and selling.
However, Berkshire's 13F only tells part of the story of what's under the hood.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
Berkshire has a secret $642 million portfolio -- and it holds a trio of high-growth AI stocks
In 1998, Berkshire Hathaway announced it would acquire reinsurance company General Re in an all-stock deal worth $22 billion. Though the reinsurance operations were the catalyst for this deal, General Re also owned a specialty investment firm known as New England Asset Management (NEAM). When the deal finalized in late 1998, Berkshire Hathaway became NEAM's new owner.
As of the closing bell on Sept. 30, NEAM had $642 million in assets under management that was invested across 120 securities (stocks, warrants, and exchanged-traded funds). Even though the Oracle of Omaha doesn't manage NEAM's investments the way he does for Berkshire Hathaway's 44-stock, $293 billion portfolio, what NEAM owns is, by definition, also owned by Buffett's company.
Though this "secret" portfolio for Warren Buffett has traditionally been focused on value stocks and brand-name businesses, it also holds shares of three of the hottest artificial intelligence (AI) stocks on the planet.
Broadcom
The first high-flying AI stock Warren Buffett secretly owns is industry-leading networking-solutions provider Broadcom (AVGO 4.11%). New England Asset Management closed out the third quarter with 19,855 shares of Broadcom, which has a present-day value of nearly $4.5 million.
NASDAQ: AVGO
Key Data Points
Just as Nvidia's graphics processing units (GPUs) have been the undisputed top choice by businesses wanting to run generative AI solutions and build/train large language models (LLMs), Broadcom's AI networking solutions have been the preferred choice for AI-accelerated data centers. For instance, the company's Jericho3-AI fabric is capable of connecting up to 32,000 GPUs to maximize computing speed and reduce tail latency. Minimizing response lag is especially important for AI-driven software and systems.
Additionally, Broadcom CEO Hock Tan believes custom AI chips could power a new channel of growth for his company. Tan expects three of its hyperscaler customers to order a combined $60 billion to $90 billion in custom AI chips over the next three years.
But it's equally important to recognize that Broadcom is more than just an AI company. For instance, it's one of the top suppliers of wireless chips used in 5G-capable smartphones. The ongoing expansion of 5G networks has led to steady demand for Broadcom's smartphone chips and accessories. It also provides cybersecurity solutions, networking products, and optical sensors, among other products.
If an AI bubble were to develop, Broadcom's diversified operating model should help it successfully navigate the storm.
Image source: Getty Images.
Microsoft
A second artificial intelligence stock that Warren Buffett secretly owns is software juggernaut Microsoft (MSFT 1.57%). New England Asset Management ended September with 7,490 shares of Microsoft, which have a present-day value of roughly $3.1 million.
Although Microsoft is developing AI-GPUs for use in its data centers, the company's artificial intelligence ties primarily have to do with use cases of this technology.
For example, Microsoft Azure is the world's No. 2 cloud infrastructure service provider, with an estimated 20% share of cloud service spending during the third quarter, according to independent tech analysis company Canalys. Microsoft has been incorporating AI solutions into Azure to give its clients access to a host of generative AI solutions. AI has the potential to reaccelerate Azure's already impressive growth rate.
NASDAQ: MSFT
Key Data Points
Microsoft also has AI development partnerships galore. Arguably the most well-known of its partnerships (and investments) is with OpenAI, the company behind ChatGPT, the popular virtual chatbot that led to the rise of AI. However, it's also partnered with BlackRock, Global Infrastructure Partners, and MGX to invest in the data center infrastructure needed to meet the demands of an increasingly AI-dependent society.
Similar to Broadcom, Microsoft is much more than just an AI company. Its cloud service operations have been consistently growing by a double-digit percentage, while its legacy operating divisions, such as Windows and Office, continue to generate bountiful operating cash flow. Microsoft has more cash than it knows what to do with -- and that's not a bad thing.
Alphabet
The third industry-leading AI stock Warren Buffett secretly owns shares of via New England Asset Management is Alphabet (GOOGL 0.42%)(GOOG 0.58%). Despite NEAM selling shares of Alphabet for five consecutive quarters, the fund still held 5,195 Class A shares (GOOGL) as of Sept. 30.
Like Microsoft, Alphabet is more about AI utility than hardware. Even though it's developing tensor processing units to speed up machine-learning workloads, this company is more about the real-world application of AI.
NASDAQ: GOOGL
Key Data Points
Google Cloud trails only Microsoft's Azure and Amazon Web Services in terms of global cloud service spending share (10% for Google Cloud), as of the third quarter of 2024. Alphabet is relying on AI to allow its customers to build and train LLMs, improving machine learning capabilities, and run generative AI solutions. By the latter-half of this decade, Google Cloud could become Alphabet's top generator of operating cash flow.
But to keep with the theme of this list, Alphabet is far more than just Google Cloud. In December, Google accounted for a nearly 90% share of worldwide internet search. Looking back 10 years, Google has consistently maintained an 89% to 93% share of global search. Being the clear choice for advertisers wanting to target users often affords Alphabet ample ad-pricing power.
Alphabet is sitting on a mountain of cash, as well. With the exception of Apple, no public company has repurchased more of their own stock over the trailing decade (ended Sept. 30) than Alphabet.
