Under the leadership of Warren Buffett, Berkshire Hathaway has carved out a remarkable reputation in the investment space, showcasing an impressive compound annual return of 19.8% since 1965. This stellar performance means that an early investment of $1,000 would have exploded to an astonishing $44.7 million today. In contrast, the same investment placed in the S&P 500 during that timeframe would have only grown to approximately $338,311. This stark difference is why investors rigorously track Berkshire’s strategies and moves.
The success of Buffett’s conglomerate can largely be attributed to his straightforward investment philosophy. He favors companies that demonstrate consistent growth, solid profitability, capable management, and shareholder-friendly practices like stock repurchase programs and dividend distributions. Interestingly, Buffett’s method doesn’t involve chasing after the latest market trends, which has kept Berkshire from overinvesting in the currently trendy domain of artificial intelligence (AI).
Nevertheless, three companies within Berkshire’s staggering $315 billion portfolio have been creatively integrating AI technologies into their longstanding business models.
First on the list is Amazon. Although it primarily made a name for itself in e-commerce, Amazon (NASDAQ: AMZN) has also emerged as the titan of cloud services through Amazon Web Services (AWS). This platform is now pivotal in advancing AI in three major ways:
- Infrastructure Development: AWS is designing its own chips, like Trainium, which aim to drastically cut AI training costs by up to 50% compared to competitors like Nvidia.
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Large Language Models (LLMs): The Titan family of LLMs, developed by AWS, allows businesses to build advanced AI applications more efficiently through its Bedrock platform.
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AI Software Solutions: The robust AI virtual assistant Q is part of AWS offerings, designed to expedite software development and extract insightful data from internal resources.
Moreover, Amazon’s retail segment is reaping the benefits of AI. The company has introduced Rufus, a virtual assistant that assists customers with inquiries and product comparisons, alongside Project Private Investigator, an AI system in fulfillment centers aimed at identifying defective products prior to shipment.
Next, we delve into Coca-Cola (NYSE: KO), which comprises 8.9% of Berkshire’s holdings. As the largest soft drink company globally, Coca-Cola is no stranger to embracing innovative technologies aimed at boosting productivity and customer engagement. In 2023, it appointed a dedicated “head of generative AI” to spearhead its initiatives, which have included AI-driven marketing campaigns and the creation of new beverage flavors. Recently, Coca-Cola made headlines by committing $1.1 billion to utilize Microsoft’s Azure AI cloud services over the next five years to refine its operations and supply chain management.
Finally, we turn our attention to Apple (NASDAQ: AAPL), which impressively represents 28.8% of Berkshire’s portfolio. As the world’s foremost tech giant, Apple is launching Apple Intelligence in collaboration with OpenAI to enhance its flagship devices like the iPhone, iPad, and Mac. This software will not only streamline message interpretation and response drafting but also empower Siri with functionalities akin to OpenAI’s groundbreaking ChatGPT, enriching user experience.
Despite some recent divestments from Apple, where Buffett remarked changes were primarily for tax efficiencies, Berkshire’s significant stake—approximately $170 billion as of earlier this year—still positions it to capitalize on future growth fueled by advances in Apple’s AI capabilities.
This intersection of technology, investment strategy, and legacy demonstrates Buffett’s unique ability to meld traditional investment principles with cutting-edge innovations. As the landscape rapidly evolves, these three companies stand as testaments to how legacy brands can harness AI to sustain growth and adapt in an ever-changing market environment.
For those looking to invest or simply gain insight into the market’s future, keeping an eye on these transformative companies—and their adaptive use of AI—could yield significant dividends.