At least six companies in Berkshire Hathaway’s portfolio are now benefiting from artificial intelligence (AI).
Warren Buffett is Berkshire Hathaway (BRK.A 1.66%) (BRK.B 1.35%) He has led the investment firm since 1965. During those 59 years, he guided the conglomerate to an average annual return of 19.8%. S&P 500 Index for the same period.
In dollar terms, $1,000 invested in Berkshire stock in 1965 would have grown to $43 million by the end of 2023. The same amount invested in the S&P 500 would have been worth just $312,230.
Buffett likes to buy stocks in companies that have steady growth, consistent profitability, solid management teams, and shareholder-friendly initiatives such as dividend plans and share buyback programs. do not All he does is follow the latest stock market trends, so he’s not going to flock to artificial intelligence (AI) stocks just because they’re generating the best returns at the moment.
But of the 47 stocks already in Berkshire Hathaway’s $410 billion public equity portfolio, at least six are using AI in some capacity. Here’s a look at each company and what they’re doing in the space.
Image credit: The Motley Fool.
1. Apple: 44.8% of Berkshire Hathaway’s portfolio
apple (AAPL 1.30%) It’s Berkshire’s largest position. The conglomerate has spent about $38 billion buying up shares since 2016, and its position is now worth $184 billion, even though Berkshire sold a 13% stake earlier this year to avoid taxes. Apple makes some of the most popular consumer devices in the world, led by its flagship iPhone, and could soon be one of the biggest players in AI.
Apple has announced its Apple Intelligence software, developed in collaboration with ChatGPT creator OpenAI, which will be released in September alongside the new iOS 18 operating system and will overhaul many of the company’s existing software products.
The Siri voice assistant is powered by ChatGPT, allowing users to read email summaries with just one tap in the Mail app, and Apple Intelligence can also transcribe voice recordings, allowing users to spend less time typing.
With more than 2.2 billion Apple devices in use worldwide, the company could become the largest seller of AI to consumers, and some Wall Street analysts expect the upcoming iPhone 16, rumored to include a powerful new chip designed specifically to handle AI workloads, will spur a big upgrade cycle.
2. Bank of America: 10.5% of Berkshire Hathaway’s portfolio
Berkshire bought the shares first Bank of America (BAC -0.53%) It was acquired in 2007 and is now the conglomerate’s second-largest holding.
Because the banking industry is slow-moving, investors probably don’t associate banks with cutting-edge technology, but Bank of America was an early adopter of AI, launching an AI assistant called Erica in 2018. Erica can notify customers of upcoming bills, look up past transactions, and even suggest ideas for saving money and reducing debt.
Over the past six years, Erica has logged more than 2 billion customer interactions, and adoption is accelerating: Bank of America recently deployed Erica to business clients using its CashPro platform, and the chatbot is already automatically resolving 43% of inquiries without human intervention.
AI tools like Erica will likely reduce the human workforce required by banks, especially in customer service departments, and those cost savings could translate into significant revenue gains.
3. Coca-Cola: 6.1% of Berkshire Hathaway’s portfolio
last year, coca cola (K.O. 0.95%) Generative AI has helped develop a new beverage called Coca-Cola Y3000, where the AI model used customer data to predict what the popular drink will taste like in the year 3000. It’s a great marketing stunt that showcases Coca-Cola’s progressive approach to technology, and the company has even hired a “head of generative AI” in 2023.
The company recently Microsofthas committed to spending $1.1 billion on the Azure cloud platform and its generative AI services. Coca-Cola will use Azure to embed AI across its organization, powering everything from marketing to manufacturing to supply chain.
Between 1987 and 1994, Berkshire bought 400 million shares of Coca-Cola for $1.3 billion. It never sold them, and its holdings are now worth $25.1 billion. Plus, Berkshire is set to receive $776 million in dividends from Coca-Cola this year alone, highlighting the powerful effect of compound interest over the long term.
4. Visa: 0.5% of Berkshire Hathaway’s portfolio
visa (V 1.22%) The company has issued more than 4.4 billion cards worldwide, making it the largest issuer in the industry. Because Visa doesn’t make loans, it only operates a payment network, its fees steadily increase as more merchants and consumers join its ecosystem. Visa is a sweet spot for patient, long-term investors like Buffett, which is why Berkshire Hathaway has owned shares in the company since 2011.
Visa is constantly fighting fraud, including highly automated enumeration attacks that use bots to exploit vulnerabilities in its network. The company has released a new AI-powered tool for its Visa Account Attack Intelligence (VAAI) platform that automatically identifies enumeration attacks and assigns them a score, helping banks make more informed decisions about when to block transactions on behalf of their customers.
But that’s not all: Visa’s new Stand-In Processing tool steps in if there’s a bank outage or network interruption, using AI to approve or deny transactions to ensure service to customers continues uninterrupted.
Visa processed over 72 billion transactions last quarter alone, and given the volume and data involved, automation is essential, so investors should expect the company to continue to push the boundaries of innovation when it comes to AI.
5. Amazon: 0.5% of Berkshire Hathaway’s portfolio
Berkshire buys Amazon (AMZN -0.29%) Amazon went public in 2019, but Buffett regrets not realizing the opportunity sooner: Amazon has expanded beyond its e-commerce roots and now has businesses in video streaming, digital advertising, cloud computing, and artificial intelligence.
The cloud division of Amazon Web Services (AWS) is investing heavily in AI, developing its own chips, its own large-scale language models (LLMs), and even its own applications, all of which are available to businesses and developers to create their own AI products or to make their daily work more efficient.
Amazon also uses AI in its recommendation engine on Amazon.com, which learns customer preferences and shows them more of those products to drive sales. Additionally, Amazon’s AI software helps merchants create product pages with compelling descriptions and images.
Amazon just joined the exclusive $2 trillion club and is poised for a big long-term upside thanks to AI.
6. Snowflake: 0.2% of Berkshire Hathaway’s portfolio
Snowflake (snow -1.76%) Snowflake doesn’t fit Buffett’s usual criteria: The cloud-computing company is growing but far from profitable and has never returned any money to shareholders. Berkshire Hathaway acquired Snowflake around the time of its 2020 IPO, a decision likely made by one of Buffett’s subordinates.
Snowflake’s data cloud also enables organizations to aggregate data spread across multiple cloud platforms, eliminating silos for more effective analytics, and the company released Cortex AI last year, which gives businesses tools to combine their own data with off-the-shelf LLM to develop AI models.
Cortex AI also includes several AI-powered tools: Copilot chatbot understands natural language and can provide support across the Snowflake platform, and Document AI allows developers to quickly extract valuable data from unstructured sources like contracts and invoices.
Snowflake is well positioned to succeed in the world of AI, but investors should tread with caution as the stock is priced so high.
