This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
Key Points
- Users continue to upgrade to new iPhones, solidifying Apple's hold on its user base.
- Amazon sees huge opportunities as AI changes every aspect of work.
Legendary investor Warren Buffett took the helm of the holding company Berkshire Hathaway in 1965, and he has led it to fantastic, market-crushing gains. Through the end of 2024, just a year shy of his retirement, Berkshire Hathaway had gained 5,502,284% in per-share market value versus a 39,054% gain for the S&P 500.
Investors looking to emulate his fantastic success are best off following his advice, or you can easily buy shares of Berkshire Hathaway stock. If you look through the company's equity portfolio, which is public, you might be surprised to see a few tech stocks.
Buffett is a fan of value stocks and dividend stocks, and he loves consumer goods. In fact, the two artificial intelligence (AI) stocks he does own -- Apple (NASDAQ: AAPL) and Amazon (NASDAQ: AMZN) -- are both consumer goods giants, and AI can drive further growth for both of them.
Apple: 24.3% of Berkshire's portfolio
Apple is one of a trio of stocks that Buffett said he would never sell. While many people would label it a tech company, Buffett loves the consumer goods aspect of its business. It sells lots of devices to lots of people, and the interconnected system creates an Apple community with loyal users and customers who typically buy all-Apple products -- iPhones, laptops, and the like.
The iPhone is its premier product, accounting for about half of total revenue. Users love its design, quality, features, and more. Once converted, they typically don't look back.
Although fans are known to upgrade to new models, it often takes a few years. Recently, there have been higher sales from customers who upgraded when digital became more important during the pandemic.
Increasing iPhone sales have greater implications than simply adding to the top line. Investors and analysts have been worried about the trajectory of Apple Intelligence, which seems to be behind other AI programs.
But increasing iPhone sales are a clear indication that customers are happy with their devices, that the level of AI is working for them, and that there are other features that may be more important. This is Apple's edge, and it's why Buffett loves it.
Amazon: 0.7% of Berkshire's portfolio
Amazon is only a small fraction of Buffett's portfolio, but it packs a mean punch. It's one of the most important AI companies in the world, and combined with its consumer focus, Amazon still has incredible long-term opportunities.
The AI business runs on Amazon Web Services (AWS), the cloud services segment. The company has developed a large platform offering all kinds of services, including the tools for developers to build their own large language models (LLMs), as well as to engage with an assortment of LLMs through its Bedrock program.
Amazon is investing hundreds of millions of dollars in its AI business, and it's already paying off: It has a run rate of more than $100 billion, and management thinks it's just getting started. "Every single area that I can think of in the way we work is likely going to be impacted in some meaningful way by AI," CEO Andy Jassy has said.
And it's still in its early stages. The company is developing its own chips and hardware to offer budget options and compete on price, and it has a long-term vision as it sets up its AI business. That means investing in powerful data centers that can support AI capabilities for its AWS clients.
It's important to note that, as with Apple, Buffett didn't buy Amazon stock for exposure to AI; he's not a big fan of the technology. The two investments stand out for many reasons, and one of them is that they offer so much more besides the AI opportunity.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
