32.4% of Warren Buffett’s $292 Billion Portfolio Is Invested in 4 Artificial Intelligence (AI) Stocks
Warren Buffett is the CEO of Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B), which has delivered an annual return of 19.8% since Buffett took the helm in 1965. That could have turned an investment of $1,000 into more than $42 million. The same investment in the S&P 500 index would have grown to just $308,115 over the same period.
Buffett’s simple long-term investing strategy is the secret to Berkshire’s success. He likes companies with steady growth, reliable profitability, strong management teams, and shareholder-friendly initiatives like dividends and stock buybacks. You will never see him and his team piling money into the latest stock market trends — even one as powerful as artificial intelligence (AI).
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However, four stocks in Berkshire’s $292 billion portfolio of publicly listed securities are deploying AI into their legacy businesses in unique ways.
Domino’s Pizza (NYSE: DPZ) is the world’s largest pizza chain with over 21,000 stores in 90 countries, which serve more than 1 million customers every day. Berkshire just added this stock to its portfolio in the third quarter of 2024 (ended Sept. 30), which might be a great sign for the pizza giant considering the conglomerate was a net seller of stocks overall.
Domino’s puts technologies like AI at the center of its operations, because they drive efficiency, which lowers costs and boosts profits. Thanks to the predictive capabilities of AI, it can start making pizzas before a customer even finishes placing an order. That means each pizza is cooked sooner and reaches the customer faster than ever.
The company also uses Microsoft‘s Azure OpenAI platform for the computing infrastructure and software required to create powerful AI assistants for its website, which can help customers with their orders. Lastly, AI is going to streamline operations in each store by helping managers save time on day-to-day tasks like inventory management and employee scheduling.
Amazon (NASDAQ: AMZN) is the world’s largest e-commerce company, but most investors are more focused on its Amazon Web Services (AWS) cloud business, which is trying to dominate the three core layers of AI:
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Infrastructure: AWS builds data centers fitted with industry-leading AI chips from suppliers like Nvidia and has designed its own chips, called Trainium and Inferentia. With Trainium, developers can save an estimated 50% on AI training costs compared to using other chips, and Amazon says it’s producing more of them than it expected because demand is so high.
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Large language models (LLMs): Amazon developed its own family of LLMs called Titan, but the AWS Bedrock platform is also home to the world’s leading third-party LLMs like Anthropic’s Claude 3.5, and Meta Platforms‘ Llama 3.2. Developers use these ready-made LLMs to accelerate the build-out of their AI chatbots and software applications.
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Software: AWS developed an AI virtual assistant called Q to answer questions about an organization’s internal data, and it can be prompted to instantly generate computer code. Amazon says Q is the most powerful assistant in the world for software developers.
During the recent third quarter of 2024, Amazon said AI revenue within AWS grew by a triple-digit percentage compared to a year ago, and it’s growing more than three times faster than the cloud division did at the same stage of its evolution.
Berkshire invested in Amazon stock in 2019, and Buffett has expressed regret for not identifying the opportunity sooner. Even though it represents only 0.7% of the conglomerate’s portfolio, it could still deliver spectacular returns over the long run thanks to AI.
Berkshire acquired 400 million shares in Coca-Cola (NYSE: KO) between 1988 and 1994 at a cost of $1.3 billion. It still holds all of them, and they are now worth $24.7 billion! AI certainly wasn’t on Buffett’s mind when he decided to invest in the soda giant back then, but it’s playing an increasingly important role in the business today.
Last year, Coca-Cola appointed a chief of generative AI. So far, the company has used the technology to create marketing campaigns and make a promotional version of its flagship soda called Coca-Cola Y3000. It captures what the drink might taste like in the year 3000 by using AI to analyze high volumes of customer data.
Back in April, Coca-Cola also struck a five-year $1.1 billion deal with Microsoft Azure to improve its supply chains, marketing, and productivity.
Apple (NASDAQ: AAPL) is Berkshire’s largest holding. The stock used to account for almost 50% of the conglomerate’s entire portfolio, but Buffett sold more than half of his position during the first three quarters of 2024. We don’t exactly know why, but Buffett has mentioned at least part of the reason for selling was that he thinks the capital gains tax could rise in the future, so it’s beneficial to take profits now.
The timing is certainly interesting. On the one hand, the S&P 500 is expensive right now with a price-to-earnings ratio (P/E) of 25.6, which is a 41% premium to its long-term average of 18.1. On the other hand, Apple is on the cusp of realizing an enormous opportunity within the AI space, which could fuel a significant device upgrade cycle over the next few years.
The company recently started rolling out its Apple Intelligence software in the latest versions of its iPhone, iPad, and Mac computer lineup. It was developed in partnership with OpenAI. It allows users to summarize messages and emails with a single tap, and it can generate text and images. Plus, Apple’s Siri voice assistant will now draw on the knowledge of OpenAI’s ChatGPT, which will make it more powerful than ever.
Although Berkshire has been a heavy seller of Apple stock lately, Buffett expects it to remain the conglomerate’s largest holding for now. Therefore, the investing legend is still likely to do very well if Apple’s AI efforts pay off.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, Berkshire Hathaway, Domino’s Pizza, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
32.4% of Warren Buffett’s $292 Billion Portfolio Is Invested in 4 Artificial Intelligence (AI) Stocks was originally published by The Motley Fool
