Warren Buffett readily admits that he doesn't understand artificial intelligence (AI). He has also said that he won't invest in businesses that he understands. So, does that mean the legendary investor doesn't own any AI stocks? Nope.
Actually, Buffett has invested roughly $90 billion in nine companies that are heavily focused on AI. Here they are -- and which one is the best of the bunch.
Image source: Getty Images.
AI stocks in Berkshire Hathaway's portfolio
Apple (AAPL +1.08%) ranks as the largest holding in Berkshire Hathaway's (BRK.A +0.43%) (BRK.B +0.40%) portfolio. Berkshire's stake in the iPhone maker is valued at close to $59.3 billion. Although Buffett significantly reduced the conglomerate's position in Apple last year, it still makes up 21% of Berkshire's total portfolio.
NASDAQ: AAPL
Key Data Points
AI has been at the forefront of Apple's development strategy for years. However, the company was seemingly left behind in the generative AI race until it launched Apple Intelligence in 2024. So far, though, Apple Intelligence doesn't appear to be igniting the super-cycle of iPhone upgrades that some analysts predicted.
Amazon (AMZN +1.93%) is another top AI stock in Berkshire's portfolio, albeit a much smaller one. Berkshire owns around $2.1 billion of the e-commerce and cloud service giant's shares. Buffett didn't make the initial decision to buy Amazon; one of Berkshire's other investment managers (either Todd Combs or Ted Weschler) bought the stock.
Most AI models run in the cloud. As the largest cloud services provider in the world, Amazon Web Services (AWS) has been a big winner as organizations scrambled to build and deploy AI models in the cloud. Amazon is also using AI extensively internally to increase efficiency and provide more services to customers.
NASDAQ: AMZN
Key Data Points
AI stocks in Buffett's "secret portfolio"
Apple and Amazon are the only AI stocks owned directly by Berkshire Hathaway. But I said that Buffett owned nine AI stocks. Where are the other seven? In Buffett's "secret portfolio."
General Reinsurance acquired New England Asset Management (NEAM) in 1995. Three years later, Berkshire Hathaway acquired General Re. NEAM continues to manage investments for insurance companies. Its holdings don't show up in Berkshire Hathaway's regulatory filings, but any stock owned by NEAM is also owned by Buffett.
Apple is the only AI stock in both Berkshire's and NEAM's portfolios. NEAM owns two other so-called "Magnificent Seven" stocks -- Google parent Alphabet (GOOG +1.00%) (GOOGL +1.08%) and Microsoft (MSFT +1.08%). Like Amazon, both Alphabet and Microsoft are major cloud service providers and are profiting from the strong AI tailwind.
NASDAQ: GOOGL
Key Data Points
NEAM also has stakes in a couple of tech pioneers that are investing heavily in AI. IBM (IBM +1.25%) made headlines in the past with the success of its Watson AI technology. Texas Instruments (TXN +1.76%) isn't exactly a shining star in the AI world. However, the company makes edge AI products (AI deployed on local devices) and is working with Nvidia to develop power management and sensing technologies for data centers.
The stocks of three AI chipmakers are also in NEAM's portfolio. Broadcom (AVGO +0.86%) manufactures AI products, including Ethernet switches designed to accelerate AI workloads and custom AI accelerators. NXP Semiconductors (NXPI +0.50%) and Qualcomm (NASDAQ: QCOM) sell products that support edge AI.
The best of the bunch
If you're an income investor, Texas Instruments is probably the best pick among Buffett's nine AI stocks. Its forward dividend yield stands at 2.73%.
Alphabet is arguably the most attractively valued AI stock in the group, with growth prospects factored in. The Google parent's price-to-earnings-to-growth (PEG) ratio is 1.36.
I think the best Buffett AI stock all-around, though, is Amazon. The company is poised to profit as more organizations move their apps and data to the cloud. It still has significant growth prospects in e-commerce as well. Amazon is also expanding into new markets, including healthcare, autonomous ride-hailing, and satellite internet services.
