2 Undervalued AI Stocks for Buffett-Style Investors

Published Date : 06/06/2025 

Discover two AI stocks that align with Warren Buffett's value investing philosophy, including one already held by Berkshire Hathaway. 

Artificial intelligence (AI) is poised to be the biggest growth opportunity for investors this century. According to a projection by the United Nations Trade and Development, the AI market is expected to grow from $189 billion in 2023 to $4.8 trillion by 2033. Fortunes will be made during this growth sprint, and finding the best AI stocks to invest in now could give your portfolio a significant advantage. But what about those who follow the philosophy of legendary value investors like Warren Buffett? Right now, there are two AI stocks that even Buffett-minded investors will love. In fact, Berkshire Hathaway already has a position worth more than $2 billion in one of the well-known businesses discussed below.

Nvidia is a great AI stock for value investors. Nearly every investor who follows the AI space will be well aware of Nvidia. With a market cap of more than $3 trillion, it's one of the three largest companies in the world. Nvidia designs and sells a variety of types of computer chips and software, but it's best known for its high-end graphics processing units, or GPUs. These specialized parallel processors provide precisely the sort of computing power necessary to train and power machine learning and artificial intelligence models.

Because it was already dominating the GPU space when the AI trend took off, Nvidia now has a roughly 90% market share in GPUs destined for AI applications—a lead that has put it at the center of the AI revolution. As you might expect, Nvidia's sales have grown tremendously in recent years thanks to escalating demand for AI software, which has thus escalated demand for the GPUs that allow the technology to function at scale. Over the past three years alone, Nvidia's revenue has jumped by a total of 450%. And if analysts' forecasts are any indication, its sales could continue to grow at double-digit percentage rates annually for the next decade and beyond.

Accordingly, Nvidia's price-to-sales multiple is a lofty 22.9. But because the company boasts one of the highest gross margins in the industry, the shares also trade at just 44 times earnings. That is a premium valuation, but given the rapid growth expected, shares trade at just 32 times forward earnings. Again, that's still fairly expensive—but it's not as expensive as you might think a dominant AI leader with a bright future would be. An oft-repeated Buffett quote is that 'It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price,' and he frequently advises that people should invest in quality businesses for the long term. Based on Nvidia's competitive advantages and high profitability, it's still trading at a fair price. The upfront premium should quickly come to look like a steal for investors who are willing to hang on to the stock for many years.

Buffett is betting nearly $2 billion on this AI stock. Want to invest in an AI stock that's already in the portfolio of Buffett-run Berkshire Hathaway? There is one, but many investors may not recognize it as an artificial intelligence giant: Amazon. Most people think of Amazon as an e-commerce business. That segment still produces most of its revenue. But in terms of operating profit, the biggest contributor is actually Amazon Web Services, more commonly referred to simply as AWS. It's the largest cloud infrastructure provider in the world. With a market share of about 30%, it controls nearly as much as the next two competitors combined. AWS and its cloud computing peers are some of the biggest buyers of GPUs. Rather than building out expensive infrastructure themselves, most AI companies rely on cloud computing services to help them scale up their infrastructure on demand. So if Nvidia is at the center of the AI revolution, so is AWS, and thus Amazon.

Berkshire Hathaway opened its stake in Amazon back in 2019. Today, its position is worth just over $2 billion, and it made no changes in the position last quarter, even with shares at record prices. While its e-commerce business is typically in the spotlight, the company's AWS segment makes it a strong, though slightly diluted, AI pick for investors. 

Frequently Asked Questions (FAQS): 

Q: What is the projected growth of the AI market?

A: The AI market is projected to grow from $189 billion in 2023 to $4.8 trillion by 2033, according to the United Nations Trade and Development.

Q: What is Nvidia's market share in GPUs for AI applications?

A: Nvidia has a roughly 90% market share in GPUs destined for AI applications, making it a dominant leader in the AI revolution.

Q: How much has Nvidia's revenue grown in the past three years?

A: Nvidia's revenue has jumped by a total of 450% over the past three years, driven by the increasing demand for AI software and the GPUs that power it.

Q: What is the largest contributor to Amazon's operating profit?

A: The largest contributor to Amazon's operating profit is Amazon Web Services (AWS), which is the largest cloud infrastructure provider in the world.

Q: How much is Berkshire Hathaway's stake in Amazon worth?

A: Berkshire Hathaway's stake in Amazon is worth just over $2 billion, and it has maintained this position even with shares at record prices. 

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