Around 32.4% of Warren Buffett's massive $292 billion investment portfolio is allocated towards four Artificial Intelligence (AI) companies.

Around 32.4% of Warren Buffett's massive $292 billion investment portfolio is allocated towards four Artificial Intelligence (AI) companies.

Warren Buffett serves as the chief executive of Berkshire Hathaway (BRK.A -1.29%, BRK.B -1.41%), a company that has delivered an impressive annual return of 19.8% since Buffett took charge in 1965. This performance could have turned an initial investment of $1,000 into an astounding $42 million. In contrast, the same investment in the S&P 500 index would have grown to a more moderate $308,115 over the same period.

Buffett's success with Berkshire is largely due to his straightforward long-term investment strategy. He favorably regards companies with consistent growth, robust profitability, competent management teams, and pro-shareholder initiatives such as dividends and share repurchases. You'll never find Buffett or his team jumping on popular stock market trends, not even one as influential as artificial intelligence (AI).

Despite his skepticism towards AI, four stocks within Berkshire Hathaway's $292 billion portfolio of publicly traded securities are integrating AI into their legacy businesses in inventive ways.

1. Domino's Pizza: 0.2% of Berkshire's portfolio

The world's largest pizza chain, Domino's Pizza (DPZ -0.40%), with over 21,000 stores across 90 countries, has nearly 1 million customers daily. Berkshire started investing in this stock during the third quarter of 2024 (ends Sept. 30). This move could indicate positive feelings towards the pizza company, especially considering Berkshire was a net seller of stocks overall in this period.

Domino's harnesses AI to enhance its operations, mainly by driving efficiency to sell pizzas at lower costs and higher profits. By using AI predictions, the company can make pizzas before customers complete their orders. This translates to quicker pizza preparation and faster delivery times. In addition, Domino's utilizes Microsoft's Azure OpenAI platform for its website's powerful AI assistants to help customers place orders more efficiently. AI aims to streamline operations within each store by reducing the time spent on tasks like inventory management and employee scheduling.

2. Amazon: 0.7% of Berkshire's portfolio

Amazon (AMZN -0.41%), the largest e-commerce company, is primarily recognized for its impressive Amazon Web Services (AWS) cloud business. This division is making waves by trying to lead the three core layers of AI:

• Infrastructure: AWS offers top-tier AI chips provided by firms like Nvidia and has developed its own AI chips called Trainium and Inferentia to lower AI training costs by an estimated 50%.
• Large language models (LLMs): AWS houses AI family titles like Titan, which developers use to create AI chatbots and software applications faster. It also accommodates world-leading third-party LLMs, such as Anthropic's Claude 3.5 and Meta Platforms' Llama 3.2.
• Software: AWS created Q, an AI virtual assistant capable of answering questions about internal data and generating software code instantly.

During the latest third quarter of 2024, Amazon revealed that AI revenue within AWS grew by triple digits compared to the previous year and is growing at a rate higher than three times that of the entire cloud division. Berkshire purchased Amazon stock in 2019, and Buffett has admitted to feeling regret for missing this opportunity earlier. Despite representing only 0.7% of Berkshire's portfolio, Amazon's potential for future growth through AI could be substantial.

3. Coca-Cola: 8.4% of Berkshire's portfolio

Berkshire acquired 400 million shares in Coca-Cola (KO 0.11%) between 1988 and 1994 at a cost of $1.3 billion. The conglomerate still keeps this entire stake, which is now worth $24.7 billion! Although AI wasn't a consideration when Buffett invested in Coca-Cola, it's now playing an essential role in the business.

Last year, Coca-Cola hired a chief of generative AI. The company used AI for marketing campaigns and to create a promotional version of its flagship soda called Coca-Cola Y3000. The AI-powered culinary adventure imagines what the drink might taste like in the year 3000. Coca-Cola also struck a deal with Microsoft Azure to enhance supply chains, marketing, and productivity for five years and $1.1 billion.

4. Apple: 23.1% of Berkshire's portfolio

Berkshire's largest investment is in Apple (AAPL 1.61%). Initially, Apple held close to 50% of Berkshire's entire portfolio, but Buffett sold over half of his shares during the first three quarters of 2024. Although Berkshire hasn't divulged reasons behind the sale, Buffett mentioned capital gains taxes could potentially rise in the future, which would make it advantageous to realize profits now.

The timing certainly has an intriguing twist. While the S&P 500 appears to be overvalued at the moment, boasting a price-to-earnings ratio (P/E) of 25.6, a staggering 41% above its historical average of 18.1, it's worth noting that Apple is poised to seize a monumental chance within the AI sector. This could spark a major technology upgrade trend over the coming years.

Apple has commenced implementing its Apple Intelligence software across its latest iterations of iPhone, iPad, and Mac computer models. This innovative technology, developed in collaboration with OpenAI, allows users to swiftly condense emails and messages with a mere tap, and it's also capable of producing text and images. Furthermore, Apple's virtual assistant, Siri, will soon benefit from OpenAI's ChatGPT's wisdom, enhancing its capabilities to unprecedented levels.

Even though Berkshire Hathaway has been offloading Apple shares quite frequently, renowned investor Buffett anticipates that Apple will continue to top Berkshire's portfolio of investments in the short term. Consequently, the investment titan remains optimistic about his financial prosperity should Apple's AI aspirations come to fruition.

1. Warren Buffett's investment strategy in Berkshire Hathaway extends beyond traditional finance, as evidenced by their portfolio's inclusion of tech companies like Domino's Pizza that utilize AI to improve operations and reduce costs.
2. Berkshire Hathaway's investment in Amazon, which makes up 0.7% of their portfolio, is significantly benefiting from Amazon Web Services' (AWS) advancements in AI. AWS is leading in infrastructure, large language models, and software, driving triple-digit growth in AI revenue within AWS.

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