This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
Key Points
- Warren Buffett generally doesn’t invest in tech stocks, but he couldn’t resist the following two.
- These players have something Buffett likes: fantastic moats, or competitive advantages.
Warren Buffett is stepping down as chief executive officer of Berkshire Hathaway at the end of the year, but he's expertly prepared the terrain for his successor, Greg Abel. At the helm for nearly 60 years, the billionaire has scored market-beating returns -- and he's done this through buying quality stocks and holding on for the long term.
Though Buffett isn't known for investing in technology stocks, he has made exceptions from time to time. This has resulted in the purchase of two technology powerhouses that, together, now make up 23% of his $257 billion portfolio. These players have well-established positions in their markets, delivered earnings growth over time, and seen their share prices climb -- and the good news is that these companies could continue to score a win for investors in the years to come.
Let's take a closer look at these top tech players that have been successful enough to make a nontech but brilliant investor like Buffett sit up and take notice.
1. Apple (22% of Buffett's portfolio)
Buffett has significantly trimmed his stake in Apple (NASDAQ: AAPL) over the past year, but even after doing this, it remains the biggest position in the Berkshire Hathaway portfolio. On top of this, in the May shareholder meeting, Buffett thanked Apple chief Tim Cook for the company's performance -- and even joked that Cook has made Berkshire Hathaway more money than he did over the years.
All this suggests that Buffett remains optimistic about Apple's ongoing growth story. It's important to remember that Apple, maker of the world-famous iPhone, has something Buffett greatly appreciates in a company, and that's a solid moat, or competitive advantage. And this is Apple's brand strength -- we can see this as iPhone users eagerly wait for the next version to hit the shelves and choose it over rivals even if the price is higher.
The company recently reported a record year, with revenue for fiscal 2025 reaching $416 billion, and Apple also announced a record September quarter -- revenue rose 8% to reach more than $102 billion.
And one element in particular -- the installed base of active Apple devices hitting an all-time high -- represents the key to future growth. Users of these devices may sign up for a wide range of services from digital entertainment to cloud storage, and this creates recurrent revenue for Apple. So, when a device is sold, the revenue opportunity may be just beginning. Record services revenue quarter after quarter shows that this is indeed happening.
So, this tech giant can offer investors a certain degree of safety thanks to its well-established business and solid moat as well as the ticket to growth over time.
2. Amazon (0.8% of Buffett's portfolio)
Back in 2018, Buffett expressed regret about not getting in on Amazon (NASDAQ: AMZN) in its earlier days -- then, one of his investment managers in 2019 decided to take the leap. And Buffett hasn't turned back as he continues to hold on to Amazon shares.
Amazon, like Apple, has an impressive moat, and in this case it's the company's extensive fulfillment network, as well as its Prime subscription program. It would be very difficult, and likely impossible, for another player to develop a similar offering and unseat this market giant. Since Amazon improved its cost structure in recent years, it's been able to boost earnings -- and this should continue as a better cost structure supports higher profitability.
The company, thanks to its broad range of sellers and product sourcing options, also hasn't experienced major headwinds from import tariffs. So, the e-commerce structure Amazon has built over the years is showing its strength, and should continue to do so.
Amazon also has become a major player in the world of technology thanks to its cloud computing unit, Amazon Web Services (AWS). In fact, AWS actually drives overall profit at the company, so it is a key part of the business. This is important moving forward: AWS has established itself as a leader in the high-growth artificial intelligence (AI) market, offering AI products and services to its customers. The position has already helped AWS reach a $132 billion annualized revenue run rate, and considering demand for AI, momentum may continue.
So, though Buffett didn't buy Amazon during its earliest days, he's still scoring a win from his later purchase -- and investors who get in on Amazon today may do the same a few years down the road.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
