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For the better part of 60 years, berkshire hathaway (NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett is putting on a show for Wall Street and the investment community. Despite being as fallible as any other investor, the “Oracle of Omaha,” as he is affectionately known, has announced that as of the closing bell on March 15th, the total value of his company’s Class A shares (BRK.A) It delivered a whopping 4,995,105% profit. .
Huge books have been written detailing the “recipes” Buffett used to significantly outperform his benchmarks. S&P500. Typically, this means looking for branded companies with sustainable competitive advantages and reliable management teams.
But you might be surprised to learn that three of the 45 stocks Buffett and his investment team currently own in Berkshire Hathaway’s $366 billion portfolio are cutting-edge artificial intelligence (AI) stocks. . PwC estimates that AI solutions – software and systems that handle tasks normally assigned to humans – could add $15.7 trillion to global gross domestic product by the end of 2020.
As of March 15, 44% ($159 billion) of the $366 billion portfolio Buffett oversees at Berkshire Hathaway was invested in three widely held AI stocks. Nvidia Not one of them.
Apple: $156,317,767,200 (42.8% of invested assets)
The bulk of Buffett’s AI holdings can be traced back to the tech stocks that make up the largest portion of Berkshire’s investment portfolio. apple (NASDAQ:AAPL). Apple has more than 4 times the weight bank americawhich is Berkshire’s second largest holding (10% of invested assets).
Although Apple hasn’t developed the infrastructure that made Nvidia the foundation of its AI movement, AI solutions are built into virtually all of its products and are important to the company’s long-term growth strategy. Apple has used AI to improve the autocorrect and word suggestion features of its U.S. market share leader, the iPhone, and recently launched its mixed reality Vision Pro headset, which incorporates AI-powered eye and hand tracking. Now on sale.
Artificial intelligence solutions are a staple of Apple products, but Buffett and his top investment aides, Ted Weschler and Todd Combs, undoubtedly bought Apple stock for a variety of reasons.
One of Apple’s main attractions is its outstanding customer loyalty. One of the most famous and valuable global brands. His over 50% share of the US smartphone market means that consumers look forward to the launch of a new iPhone every year.
Mr. Oracle of Omaha is probably also enamored with Apple’s top management team. In addition to continually improving the iPhone’s capabilities and developing the Apple Watch, Apple CEO Tim Cook is spearheading a transformation that will make the company more service-oriented. The emphasis on subscription services has steadily increased Apple’s profit margins, smoothed out the sales volatility seen at the end of major iPhone upgrade cycles, and increased consumers’ ability to use Apple’s ecosystem of products and services. You should learn to stay within.
Another reason Buffett is a big fan of Apple is the company’s unparalleled capital return program. Apple returned just over $15 billion in dividends to shareholders last year, and has repurchased an astonishing $651 billion worth of common stock since early 2013. This means that Berkshire is steadily becoming a bigger shareholder in Apple without having to do anything. Raise your finger.
Amazon: $1,744,200,000 (0.5% of invested assets)
The second artificial intelligence stock in Warren Buffett’s $366 billion portfolio, Berkshire Hathaway, is none other than the e-commerce kingpin. Amazon (NASDAQ:AMZN).
Amazon leverages AI here in countless ways. Examples include recommending new products by analyzing what a user buys and puts in his shopping cart, or using Amazon Web Services (AWS) customer-generated AI to build applications. This includes allowing us to customize our advertising and improve our interactions with our customers.
Additionally, Amazon is developing its own graphics processing units (GPUs) for its data centers that can complement or even replace Nvidia’s GPUs, which have taken the AI movement by storm.
Most people are familiar with Amazon because it is by far the dominant online marketplace, but it’s actually the company’s ancillary business segments that do most of the heavy lifting. Perhaps no segment is more important than AWS.
Last year, AWS accounted for about one-sixth of Amazon’s net sales but two-thirds of the company’s operating profit. Enterprise cloud spending still appears to be in a relatively early stage of expansion, suggesting that AWS will see double-digit revenue growth for years to come. As of September 2023, AWS leads all other cloud infrastructure service platforms with a 31% share of global spending.
Interestingly, Amazon is also pretty cheap. The stock is currently available at a discount of more than 40% from the average multiple to cash flows over the next five years. This may not be the traditional “value stock” that Buffett seeks, but it’s certainly one that has piqued the interest of one or both of Buffett’s top investment aides.
Snowflake: $961,500,271 (0.3% of invested assets)
The third AI stock, which together with Apple and Amazon accounts for about 44% of Berkshire Hathaway’s investment assets, is a cloud data warehouse company. snowflake (New York Stock Exchange: Snow). This is another Berkshire holding that was almost certainly added due to the influence of Weschler or Combs.
Snowflake attracted the attention of AI investors this summer when it announced a partnership with Nvidia to make Nvidia’s high-performance GPUs available to Snowflake accounts. Snowflake also offers generative AI solutions available to customers to help train, customize, and deploy language models at scale.
What has really attracted investors since its listing in September 2020 is its clearly defined competitive advantage. For example, sharing information can be difficult for users of competing cloud infrastructure service platforms. Snowflake builds its infrastructure on the most popular cloud platform, so data sharing and transfer is seamless.
Customers also seem to appreciate Snowflake’s transparent pricing policy. Rather than utilize subscription pricing like many of its competitors, Snowflake has chosen to charge users based on the amount of data they store and the number of her Snowflake Compute Credits they use. .
However, despite these clear competitive advantages, it has been difficult to justify Snowflake’s premium valuation. The days of his triple-digit sales growth are long gone. Companies remain cautious about the near-term outlook for the U.S. economy, with Snowflake’s annual sales growth expected to slow to about 22% this fiscal year. At more than 160 times estimated earnings per share, investors may be wise to walk away and allow Snowflake to grow to its current valuation.
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Bank of America is an advertising partner of The Motley Fool’s Ascent. John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Sean Williams holds positions at Amazon and Bank of America. The Motley Fool has positions in and recommends Amazon, Apple, Bank of America, Berkshire Hathaway, Nvidia, and Snowflake. The Motley Fool has a disclosure policy.
44% of Warren Buffett’s $366 billion portfolio is invested in three widely held artificial intelligence (AI) stocks Original article published by The Motley Fool
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