Warren Buffett has led Berkshire Hathaway’s investment portfolio to market-beating returns for more than 50 years, and he has done so with a relatively simple strategy.
It primarily invests in profitable companies with steady growth, especially if they have good management teams at the helm. But more importantly, Buffett allows time to do the heavy lifting by often holding stocks for decades.
Most technology stocks don’t fit Berkshire Hathaway’s strategy, but the conglomerate holds a handful of high-quality names in the sector. Buffett has certainly never invested in a company because of its presence in the emerging field of artificial intelligence (AI) — in fact, his right-hand man, Charlie Munger, recently said that AI is overrated!
But Buffett and Munger are poised to benefit big from the technology, because nearly half of Berkshire’s $335 billion portfolio of publicly listed securities is invested in two stocks with an increasing focus on artificial intelligence. Here’s why investors might do well to buy them, too.
1. Apple: 47.2% of Berkshire Hathaway’s portfolio
Apple (NASDAQ: AAPL) is the largest company in the world, worth $2.7 trillion. Buffett’s confidence in the tech giant is evidenced by the fact that it accounts for 47.2% of Berkshire’s portfolio alone. Apple designs and manufactures some of the world’s most popular consumer electronics. Led by its flagship iPhone, the company is quietly implementing AI across its product portfolio to improve the user experience.
Many of the software features built into their devices are already based on artificial intelligence. For example, the voice assistant Siri uses advanced conversational artificial intelligence. The predictive text built into every Apple keyboard is also powered by artificial intelligence. In addition, there are a number of other applications that are heavily dependent on technology. . Take Apple Music, for example, which uses artificial intelligence to learn what each listener enjoys most and independently curates playlists for them to boost engagement.
But AI development would not be possible without specialized computing hardware – i.e. semiconductors (chips). Apple has been designing its own chips since 2010, starting with the A-series inside the iPhone and iPad mobile devices (and iPod before it was discontinued). But AI applications represent a new challenge, because they require much more processing power than semiconductors.
Apple released the new A17 Pro chip alongside the iPhone 15 Pro in September, which is the smartphone industry’s first 3nm CPU. Apple has packed 19 billion transistors into the new chip compared to just 6 billion in its predecessor, the 5nm A16 Bionic. It enables a smartphone or tablet to process machine learning and AI workloads without connecting to the cloud via an external data center, resulting in a much faster user experience.
According to a Bloomberg report, Apple is now betting its future on generative AI. . The
company allegedly developed a major language model called Ajax, which powers its chatbot dubbed Apple GPT. It is designed to compete with other AI chatbots such as ChatGPT, which is responsible for most AI functions across Microsoft’s product suite.
Bloomberg reports that Apple invests about $1 billion annually in generative AI technology. Starting next year, it could be built into Siri to transform the capabilities of the voice assistant, and also built into Apple’s Xcode tool to allow app developers to create products more quickly.
AI may not have been on Buffett’s mind when Berkshire started accumulating Apple shares in 2018, but it could become as synonymous with the company as the iPhone in the future.