Buffett’s AI Bet: A Deep Dive
Warren Buffett, the renowned CEO of Berkshire Hathaway, has always been a figure of interest for Wall Street professionals and everyday investors alike. His investment strategies, transparent and insightful, have led to an impressive aggregate gain in Berkshire’s Class A shares of 4,362,780% as of August 3, 2023.
However, a lesser-known fact about Buffett is his significant investment in artificial intelligence (AI), the next big thing on Wall Street. AI, with its ability to automate tasks traditionally performed by humans and its potential to boost the global economy by $15.7 trillion by 2030, has caught the attention of the Oracle of Omaha.
The Big Three: Apple, Amazon, and Snowflake
Buffett’s AI investment is concentrated in three stocks: Apple, Amazon, and Snowflake, which collectively make up more than $177 billion (47.3%) of the $375 billion investment portfolio he oversees at Berkshire Hathaway.
Apple: The Tech Titan
Apple, the tech giant, forms the bulk of Buffett’s AI investment. The company’s integration of AI solutions began in 2011 with Siri on iPhone 4s and has since expanded to include machine learning technology in autocorrect and word suggestions in text, photo recognition solutions, and more. AI is also crucial to the success of Apple Watch and the recently unveiled Vision Pro headset.
However, Buffett’s investment in Apple is not solely based on its AI prowess. The global recognition of the brand, the loyalty of its customer base, and the incredible cash flow generated by the company are also significant factors.
Amazon: The E-commerce Behemoth
Amazon, the e-commerce company, is another significant AI investment for Buffett. Amazon uses AI in various ways, from its AI-powered recommendation engine to its AI-assistant Alexa for voice-enabled purchases. Furthermore, Amazon Web Services (AWS), Amazon’s core driver of operating cash flow and operating income, allows businesses to build applications with generative AI and improve customer interactions with machine learning solutions.
Snowflake: The Data Warehousing Company
The third AI stock in Buffett’s portfolio is Snowflake, a data-warehousing company known for its cloud infrastructure. In 2023, Snowflake added generative AI solutions to the data clouds of its vendors and partnered with Nvidia, giving Snowflake users access to Nvidia’s high-powered GPUs.
However, despite being at the center of a high-growth trend, Snowflake’s stock is relatively pricey compared to other cloud businesses. This, coupled with the company’s declining full-year sales growth, suggests that investors might want to adopt a wait-and-see approach following Snowflake’s newly announced generative AI push.
