Two Must-Have AI Stocks in Warren Buffett’s Portfolio

Warren Buffett’s Surprising Tech Investments

Warren Buffett, widely recognized for his value investing strategy, typically steers clear of technology stocks. However, two significant investments in his portfolio are currently thriving due to the increasing demand for artificial intelligence (AI) services. While many might not view these companies primarily as AI-focused, a closer look reveals why they stand to gain substantially from the ongoing AI revolution.

Amazon’s Key Role in AI Development

Among the top beneficiaries of the surge in AI is Amazon (AMZN -3.92%). To appreciate Amazon’s role, it’s essential to understand the infrastructure that supports AI growth.

The Foundation of AI

The current advancements in AI would not be possible without the extensive cloud infrastructure developed over the past decade. AI development and deployment require substantial computing power, which would be financially burdensome for individual companies to establish on their own. As a result, only the largest corporations could afford to engage in AI innovations, stifling diversity and competition in the market.

Cloud computing simplifies the integration of AI into business processes. According to Oracle, “the cloud is becoming the go-to way to embed AI into business applications.” This infrastructure enables companies to efficiently harness AI technology without heavy investing in physical equipment.

Amazon’s Market Position

Looking at Amazon’s position, its Amazon Web Services (AWS) division leads the global cloud market with a 31% share—more than its two closest competitors combined. This significant market lead empowers AWS to expand alongside the AI industry, benefiting shareholders like Buffett, who holds around 10 million shares valued at about $2.2 billion.

Apple’s Hidden AI Strategy

At first glance, Apple (AAPL -7.28%) may not seem like a major player in the AI landscape. The tech giant is well-known for its hardware products such as iPhones, iPads, and Macs, and while it does offer AI capabilities through Siri and various applications, it lacks a robust portfolio in dedicated AI software.

Apple’s AI Revenue Streams

This perception overlooks Apple’s strategic position in the overall tech ecosystem. Many users of AI services, such as ChatGPT, access these applications through their Apple devices, meaning that Apple benefits from subscription fees collected through its App Store. As reported by The Verge, “Apple is reportedly expecting chatbots and LLMs to start tempting people away from using traditional search engines.” This trend could lead to increased demand for AI services, enhancing Apple’s revenue without requiring them to directly develop new AI products.

Investment Potential in Apple

Warren Buffett’s investment in Apple comprises approximately 300 million shares, which amounts to an impressive market value of around $75 billion—making it his most significant stock holding. For investors looking to capitalize on the AI boom without betting directly on AI providers, Apple presents a unique opportunity worth considering.