The leader of Berkshire Hathaway, Warren Buffett, was a tech stock holdout for decades. Nothing lasts forever, though, and largely thanks to his lieutenants Ted Wechsler and Todd Combs, Berkshire is now a major institutional investor in such equities.
As such, it's also indirectly at the front of the artificial intelligence (AI) revolution. In fact, nearly one-quarter of Berkshire's equity portfolio market cap is invested in two companies actively utilizing the technology -- Apple (AAPL 0.35%) and Google's parent company, Alphabet (GOOG 0.91%)(GOOGL 0.92%), in the form of its Class A shares. Let's explore how AI is affecting their businesses.
1. Apple
For a huge tech company with considerable resources, Apple hasn't effectively leveraged those advantages to establish any kind of AI leadership. Some might have thought the company would be a pacesetter when it announced Apple Intelligence, its suite of AI-enhanced features, with its usual fanfare in mid-2024.
Image source: Getty Images.
Instead, the rollout of Apple Intelligence (AI, get it?) has felt somewhat haphazard; in some respects, it feels like this historically adventurous company is being cautious at best.
The system is limited to newer products equipped with its more-powerful processors, like the iPhone 17. It also enhances a select group of apps, and in doing so, it basically runs in the background.
To me, the company hasn't yet developed a single whiz-bang piece of software that features AI front and center. That includes Siri, its digital assistant, which has been promised a big AI makeover.
NASDAQ: AAPL
Key Data Points
Apple is a famously secretive company, making it something of a challenge to uncover the core reasons behind its relatively slow development of AI. Turnover might be a factor -- the company's senior vice president of machine learning and AI strategy, John Giannandrea, is departing early next year.
If I had to hazard a guess, I'd say that the company's AI lag might have more to do with corporate culture: It prefers to develop its systems and hardware in-house, partnering only selectively. It also likes its iOS ecosystem to be as smooth, reliable, and stable as possible, and many of the current AI models on the scene are often anything but.
So I wouldn't personally flag Apple as an AI play. In fact, I'm glad the company continues to operate in its wheelhouse of cool devices and the useful services that make them compelling products (and help to juice growth, by the way). I'm holding on to my Apple shares, but AI isn't the reason.
2. Alphabet
By contrast, Alphabet has fully embraced AI and is clearly determined to be a leader in the technology. The company has been active in the AI sphere for longer than many might realize -- its modern deep-learning efforts officially began with the formation of the wonderfully named Google Brain project in 2011.
These days, Alphabet is all about integration with its AI offerings, anchored by the foundational Gemini family of models.
Image source: Getty Images.
AI suffuses a raft of company products these days, most notably (and usefully, I'd say) as a solution embedded in the company's near-unavoidable search function. These days, a user input that reads more like a question than a simple query will often be presented with an AI Overview that does a fairly good and accurate job of covering the topic.
The company's AI technology also contributes to many of Google's public-facing software products. A user can effectively apply it as a co-author in a Google Docs document, for example, and harness data from files stored in Google Drive.
NASDAQ: GOOGL
Key Data Points
And Alphabet is no slouch when it comes to developing cutting-edge AI hardware. It created tensor processing units (TPUs), powerful specialized chips that can handle the heavy computational needs of AI. The company offers access to them as a service via Google Cloud and is now shifting toward offering them directly to large customers.
Alphabet does not break out granular data on how its AI offerings are helping its fundamentals, but we can safely assume they're a significant driver of growth. In its third quarter, the Google Cloud unit -- which houses many AI tools and services for clients -- experienced a 34% year-over-year increase in revenue to more than $15 billion, largely due to strong demand for these offerings.
So we can say that AI is not only an important technology for Alphabet, it's also sharpening the company's already razor-like competitive edge and helping to bring in billions of bucks in revenue. That, to me, makes it an ideal AI play.
