Divulging the mysteries of Warren Buffett’s investment philosophy is like opening a treasure chest brimming with investment jewels. Undeniably, when Buffett mingles with the realm of artificial intelligence (AI), the financial world takes notice. Historically, tech stocks were not his forte; instead, he favored the sturdiness of cash-generating businesses in sectors like insurance, railroads, and utilities. Yet, glimpses of change emerged as Berkshire Hathaway maneuvered its way into a select few tech stocks over the past decade.
As the wind of change swept through Berkshire’s investment portfolio, iconic tech giants like IBM, Oracle, HP, and even the elusive Snowflake felt the heat of Berkshire’s liquidation strategy. Notoriously absent from Buffett’s shopping cart was the tech prodigy Nvidia, a glaring omission in an otherwise well-steered ship.
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During Berkshire Hathaway’s annual meeting, Buffett likened AI to a mystical “genie” in a bottle, capable of shifting tides globally. While his reservoir of AI knowledge might not overflow, he recognized its world-altering potential. The apotheosis of AI could herald a blossoming economic era, a transformation that Berkshire could harness through its existing investments.
Exploring Berkshire’s treasury of AI-friendly stocks, the trinity of Apple, Amazon, and Nu Holdings emerges as prominent contenders.
Apple: A Core Holding
Berkshire’s dalliance with Apple commenced in 2016, a union that burgeoned into a $90.7 billion stake, comprising nearly 28.8% of its investment stash.
Apple’s voyage in fiscal 2023 was beset by a trifling 3% revenue descent, attributable to sagging iPhone, Mac, and iPad sales. However, fiscal 2024 portends a 9% and 17% revenue and EPS growth, fueled by resurgent device sales and a blossoming services segment.
Apple’s foray into generative AI services and OpenAI’s ChatGPT integration mark its entrée into the AI realm, potentially fortifying its competitive edge.
Amazon: Clouding the Horizon
Berkshire’s dalliance with Amazon in 2019 bears fruit in a $1.8 billion share, comprising 0.6% of its portfolio. Amazon’s e-commerce prowess marries cloud supremacy, bifurcating its revenue streams.
In the lustrous era of 2023, Amazon vaulted to a 12% revenue leap, heralding a profitable return, after a brief tango with net loss in 2022. Analysts prophesy an 11% revenue and a staggering 63% earning upsurge in 2024, as its retail and cloud domains burgeon amidst macroeconomic headwinds.
Amazon’s AI repertoire, housing large language models and custom AI chips, positions it lucratively in the AI domain, poised for expansive gains.
Nu Holdings: Scaling New Heights
Berkshire’s dalliance with Nu Holdings in its 2021 IPO bears illustrious fruit, with a $1.5 billion stake illuminating 0.5% of its investment expanse.
Nu’s geographical purview spans Brazil, Mexico, and Colombia, catalyzing a meteoric rise in customer counts and revenue. With analysts prophesying a shimmering 40% revenue and a 68% earning ascent in the offing, Nu stands as an illustrious star in the emerging-market banking firmament.
Nu’s AI synergy, epitomized by data analysis, financial assistants, and security features, augurs well for its future, propelling it into the vanguard of Latin America’s fintech and AI surge.
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The Footnote
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