Warren Buffett was born in 1930 and bought his first stock at the age of 11. By 1965, he was running his own investment firm. berkshire hathawaywhich he still leads today.
Buffett has led Berkshire to a total return of 4,384,748% over the past 58 years, enough to turn a $1,000 investment into more than $43.8 million.same investment S&P500 Over the same period, the index would be worth just $312,230.
Berkshire's incredible success stems from a simple strategy. Buffett likes to own companies with steady growth, healthy profitability, and strong management teams. He particularly likes companies that return money to shareholders through dividends and stock buybacks. One thing he's never done before is follow the latest stock market trends, whether it's the internet, cloud computing, or now artificial intelligence (AI).
That said, many of the stocks Berkshire owns are focused on the AI revolution. Two of his stocks currently account for a total of 40.2% of his $362 billion portfolio of publicly traded stocks and securities of conglomerates.
1. Amazon: 0.5% of Berkshire Hathaway's portfolio
E-commerce is Amazon's (NASDAQ:AMZN) From its core business when it was founded in 1994, it has since expanded into cloud computing, streaming, digital advertising, and AI. Berkshire didn't buy Amazon stock until 2019, and Buffett has often expressed regret for not recognizing this opportunity sooner. Currently, Amazon's valuation is $1.9 trillion, making it the fifth largest company in the world.
Amazon Web Services (AWS) is the world's largest cloud service provider by revenue. We offer hundreds of solutions to help businesses grow in the digital age and are the delivery platform for many of Amazon's AI initiatives. CEO Andy Jassy wants to dominate his three core layers of AI: infrastructure (chips and data centers), large-scale language models (LLM), and customer-facing AI applications.
Like most cloud providers, AWS provides infrastructure to its customers, including: Nvidia's industry-leading graphics chips (GPUs) are designed to handle AI workloads. But the company also designs its own chips, and Jassy says there is strong demand for his latest Trainium 2 hardware because of its attractive price and performance.
AWS also continues to expand the Bedrock platform to house a growing number of off-the-shelf LLMs. Building an LLM requires large amounts of data and financial resources, so using existing models can accelerate the development of AI applications. Amazon has built its own family of models called Titan, but AWS customers also have access to models from leading startups like Anthropic, in which Amazon recently invested $4 billion.
To cover the third and final layer, Amazon recently launched an AI virtual assistant called Q. It can analyze any company's internal data to provide useful insights, and it can also write, test, and debug computer code to speed up releases. of new software. It's the ultimate productivity tool for AWS customers.
Amazon generated $574 billion in total sales last year, more than any other technology company in the $1 trillion club. However, while the company has been profitable for the past three quarters, it has consistently generated losses as it prioritized heavy investments in growth. Coupled with the lack of a dividend or share buyback program, the stock falls short of many of Buffett's usual criteria.
This may explain why Amazon stock makes up just 0.5% of Berkshire's portfolio. However, the conglomerate may want to own more shares as AI opportunities unfold in the coming years.
2. Apple: 39.7% of Berkshire Hathaway's portfolio
Buffett certainly didn't hesitate much when making purchases. apple (NASDAQ:AAPL) stock. Berkshire first invested in the iPhone maker in 2016 and has spent about $38 billion accumulating the stake since then. Thanks to the stock's huge jump, Berkshire's Apple stock is now worth a whopping $143.5 billion, even after discounting the company's recent sale of 13% of its position in the conglomerate.
While the iPhone is Apple's flagship product, the company also has an entire portfolio of successful hardware, including the iPad, Watch, Mac computers, and iPhone accessories such as AirPods. Apple is also expanding its number of services, including Apple Music, Apple News, Apple TV, and iCloud, just to name a few. These services are typically subscription-based and often attract investors' attention because they offer much higher profit margins than Apple's hardware products.
Apple didn't become a $2.8 trillion company by standing still, and while it hasn't been as vocal about its AI ambitions as other tech giants, it could be a major blow to the emerging industry. There were early clues inside the latest iPhone 15 Pro. It's equipped with the new Apple-designed A17 Pro chip, which powers the AI workloads that power the Siri voice assistant and auto-correct keyboard features.
In March, rumors began circulating that Apple was in partnership talks with major AI chatbot developers, including: alphabet (Google) and OpenAI. These applications could allow Apple customers to quickly create content on their devices, from emails to images. You can also become a virtual assistant who can answer complex questions and make gift suggestions.
If history is any guide, Apple could charge these companies billions of dollars to install AI chatbots on 2.2 billion active devices around the world. After all, Apple already charges Alphabet about $18 billion a year to set Google as the default search engine for the company's Safari browser. It wouldn't be surprising to see similar fees for Alphabet's Gemini chatbot. We'll learn more about Apple's AI plans at June's Worldwide Developers Conference.
What's notable is that Apple meets most of Buffett's criteria. The company has experienced steady revenue growth in most years, is highly profitable, and CEO Tim Cook regularly receives praise from Buffett. Additionally, Apple pays regular dividends and just announced his new stock buyback program worth $110 billion, the largest in company history.
So why did Berkshire recently sell 13% of its Apple stock? Buffett has said it was for tax reasons (he speculates that corporate taxes could rise in the future), but investors believe that Apple will still be Berkshire's largest position at the end of 2024. He asserted that it is likely to be maintained.
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Alphabet executive Suzanne Frye is a member of The Motley Fool's board of directors. John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool's board of directors. Anthony Di Pizio has no position in any stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, and Nvidia. The Motley Fool has a disclosure policy.
The article Warren Buffett's $362 billion portfolio has 40.2% invested in two artificial intelligence (AI) stocks was originally published by The Motley Fool.
