As Warren Buffett prepares to step down as CEO of Berkshire Hathaway at the end of this year, legendary investors will leave the company with a broad and diverse portfolio. At the helm in 1965, Buffett transformed Berkshire into one of the world's largest and most successful conglomerates. Berkshire Hathaway has long been known for its value investment strategy, but the company's recent move towards technology stock reflects a shift towards embracing new growth opportunities, particularly in rapidly expanding artificial intelligence (AI). Two of the two biggest players in this space, Apple and Amazon are currently at the heart of the company's investment strategy.
apple
Apple (NASDAQ: AAPL) remains Berkshire Hathaway's largest stake, accounting for 21.6% of its $282 billion portfolio. With a market capitalization of $3 trillion, Apple ranks as the third largest company in the world, tracking only Microsoft and Nvidia. Despite Berkshire's falling in more than 600 million shares last year, Apple is the basis for its investment conglomerate strategy.
Buffett's decision to cut Berkshire's position at Apple is seen as reflecting growing concerns about the company's performance in certain areas, particularly AI capabilities. Apple is a leader in mobile hardware, but with reports of delays in developing next-generation SIRI software, it has faced difficulties moving forward with AI platforms. Furthermore, challenges in the Chinese market are hampering the deployment of Apple's AI software, with domestic brands like Huawei still dominating.
Despite these set-offs, Apple holds its position as the top holding in Berkshire's portfolio. This is evidence of Buffett's continued trust in the company's long-term potential. As AI continues to form a high-tech industry, Apple's vast resources and consumer reach allow us to take advantage of future opportunities and become a key player in the AI space.
Amazon
Unlike Apple, Amazon (NASDAQ: AMZN) constitutes a small part of Berkshire Hathaway's equity portfolio, but its presence in the company's holdings is important. In fact, Buffett admits that one of Berkshire's portfolio managers, Todd Combs or Ted Weschler, didn't buy Amazon stocks first, admitting that he pushed the investment button up. Nevertheless, Buffett admitted that he made a mistake by not buying Amazon before, as the e-commerce giant has proven to be more than just an online retailer.
A key component of Amazon's future growth lies in Amazon Web Services (AWS), the cloud computing arm. This is an important player in the generation AI revolution. AWS holds a dominant 30% share of the global cloud market, making its profits significantly from the growing demand for AI-driven solutions. AWS already has a variety of generation AI tools, offering everything from customizable leading language models (LLM) for enterprise clients to off-the-shelf programs for small and medium-sized businesses.
CEO Andy Jassy believes AWS could become a more lucrative business. This is due to the surge in generated AI, which has led to increased reliance on cloud-based infrastructure. “Before this generation of AI, we thought AWS could ultimately become a rate business that would generate tens of billions of dollars in revenue,” Jassy said in a recent revenue call. “Now I think it could be even bigger.”
Given the growing importance of AI in Amazon's business strategy, it will be interesting to see if Berkshire Hathaway will increase its stock in Amazon when Buffett resigns. AWS is already a significant contributor to Amazon's finances, accounting for 63% of our operating profit, and its role in the AI market could only expand in the next few years.
