Billionaire investor Warren Buffett has 41% of Berkshire Hathaway’s $332 billion portfolio in 2 unstoppable artificial intelligence (AI) growth stocks | The motley fool

At the same time, Berkshire Hathaway CEO Warren Buffett avoided tech stocks at all costs, reasoning that he had trouble understanding complicated technology. The iconic investor was clear about his preferences for investing in “simple businesses,” saying, “If there’s too much technology, we won’t understand it.”

Over the years, however, this attitude has changed. Today, more than 41% of Berkshire’s stock portfolio consists of two stocks poised to benefit from the artificial intelligence (AI) revolution.

1. Apple — $135 billion

Investors who have followed Berkshire Hathaway for any length of time will know that the company’s biggest AI stock is Apple (AAPL -0.82%). While the initial stake in the iPhone maker was made by one of Buffett’s money managers, the so-called “Oracle of Omaha” soon saw the appeal and began piling up shares himself. To close out the first quarter, Buffett’s stake in Apple totaled 789 million shares worth about $135 billion.

While Apple has long been on the cutting edge of AI technology, the company kept its plans for generative AI close to the vest — until recently. At Apple’s Worldwide Developers Conference (WWDC) this week, the company lifted the lid on its plans, unveiling “Apple Intelligence,” a comprehensive strategy to integrate generative AI functionality into a broad cross-section of its products and services. This includes the features of messages, photos, notes and even notifications.

The most obvious development is that Siri will get a long-awaited makeover. The digital assistant will not only get a generative AI boost, but will also be able to interact with apps on the iPhone and other devices, making it much more useful on the road.

The company was quick to point out that all of this new functionality will come with Apple’s signature privacy built-in, performing many of the AI ​​processes on the device, helping to protect user information. Access to ChatGPT will come later this year, giving users Optional to engage the chatbot for specific purposes.

Wall Street is almost universal in its satisfaction with Apple’s plans. The general consensus is that these improvements will trigger a “supercycle” of improvement. About 270 million of Apple’s 1.5 billion active iPhones are at least four years old, and this could be the catalyst behind the next iPhone buying spree.

Wedbush analyst Dan Ives predicts that Apple will sell between 225 million and 230 million iPhones this year. With an average selling price of more than $900, the company could easily set a new record for iPhone revenue.

That would be good news for Buffett AND thousands of other Apple investors.

2. Amazon — $1.8 billion

Buffett has admitted that he has “always admired Jeff [Bezos]”, AmazonS ‘ (AMZN -0.09%) former CEO. He also issued a mea culpa, saying he “blew it,” leaving behind two opportunities to invest in the e-commerce and cloud computing leader. He cited the “miracle” of the company’s growth as his push because “If I think something is going to be a miracle, I tend not to bet on it.”

At the behest of one of Buffett’s money managers, Berkshire Hathaway eventually corrected that oversight and now holds a significant stake in Amazon. The company owns 10 million shares in a stock that is currently valued at nearly $1.8 billion.

Amazon has a long history of developing advanced algorithms to drive its business, creating tools to recommend products, map delivery routes and maintain accurate inventory levels to meet demand.

Currently, the company offers a range of AI-powered products and services on its industry-leading cloud infrastructure platform, Amazon Web Services (AWS). This represents one of the company’s biggest opportunities, as AWS’ introduction of AI-powered features could be a catalyst for future cloud growth.

Is it time to buy?

Investors were recently alarmed that Berkshire sold 13% of Apple shares earlier this year. Some believed that Buffett was angry at Apple, but Buffett rejected the idea. He said the current corporate tax rate — currently at 21% — was historically low, compared to rates of 35% or 52% in recent memory.

“I would say that at the end of the year, I would think it’s extremely likely that Apple will be the largest common stock that we have,” Buffett insisted. He went further, saying that “unless something really extraordinary happens,” Berkshire will continue to hold a significant position in Apple “when Greg takes over.” Buffett was referring to his designated successor, Greg Abel. This suggests that Apple will remain a core investor for Berkshire for the foreseeable future.

Apple’s recent foray into generative artificial intelligence, pent-up demand and the stickiness of its product portfolio suggest the stock is still a buy.

The recent economic downturn and the ongoing battle with inflation have weighed on Amazon, but the company is on the road to recovery. Its e-commerce business is back to growth and demand for digital advertising and cloud services is on the rise. Despite recent challenges, it remains the world’s largest provider of e-commerce and cloud infrastructure services, which is why Amazon is also a buyer.

Adoption of generative AI continues to accelerate, although no one knows for sure how high it will go. Estimates suggest that generative AI could have an economic impact of between $2.6 trillion and $4.4 trillion in the coming years, according to global management consulting firm McKinsey & Company.

With a windfall of that size, Buffett’s stake in these AI stocks could become much more valuable.