Top AI Stock in Buffett's Portfolio: Why Amazon Leads

Published Date: 12/09/2024

Amazon is leading the charge in AI, and its latest moves could put it in competition with Nvidia. Here's why it's the top AI stock in Warren Buffett's portfolio.

Artificial intelligence (AI) is all the rage these days. The best investors on Wall Street have taken notice and are racing to acquire shares of some of the most prominent players in the field. Warren Buffett might not share the same enthusiasm as many investors and analysts, but his conglomerate, Berkshire Hathaway, owns shares in at least a couple of companies that have made key moves in AI.

Amazon is arguably the best AI stock in Berkshire Hathaway's portfolio. The e-commerce specialist has been busy releasing AI-related services, including Bedrock, which helps companies develop generative AI applications without deep coding knowledge. Amazon offers a host of AI-related services through its cloud computing arm, Amazon Web Services (AWS).

AWS is having an impact on Amazon's revenue growth. In the second quarter, Amazon's net sales increased by 10% year over year to $148 billion. AWS revenue was up almost 19% year over year to $26.3 billion. Management attributed AWS' strong performance to three factors, one of which was AI.

Amazon isn't done. In a move that could put it in a bit of a competition with Nvidia, Amazon is designing its own AI chips. The company believes customers will benefit from customized options that are cheaper than what Nvidia offers.

More reasons to buy Amazon  it doesn't feature prominently in Berkshire Hathaway's portfolio, but for investors who want a stock that is owned by Warren Buffett's Berkshire Hathaway and is a leader in AI, Amazon is a better option than Apple. Amazon isn't simply an AI play, however. AWS offers many non-AI-related services, and the company's e-commerce business benefits from a strong moat due to switching costs and the network effect.

Amazon is a leader in video and music streaming, and it has long sought to make waves in the healthcare industry. Given Amazon's track record and its ability to generate consistent earnings and cash flow, investors should expect the company to successfully uncover more meaningful growth avenues beyond the ones already at its disposal.

Amazon is an American multinational technology company founded in 1994 by Jeff Bezos. It is the world's largest online retailer and a leading provider of cloud computing services. Amazon Web Services (AWS) is a subsidiary of Amazon that provides on-demand cloud computing platforms to individuals, companies, and governments.

  Berkshire Hathaway is an American multinational conglomerate holding company founded in 1839. It is led by Warren Buffett, one of the most successful investors in history.

FAQS:

Q: What is Amazon's AI business?

A: Amazon's AI business includes a range of services, such as Bedrock, Amazon Q, Transcribe, and Translate, which are offered through its cloud computing arm, Amazon Web Services (AWS).

Q: Why is Amazon designing its own AI chips?

A: Amazon believes customers will benefit from customized options that are cheaper than what Nvidia offers.

Q: How much does Berkshire Hathaway own of Amazon?

A: Berkshire Hathaway owns 10 million shares of Amazon, which is a relatively small portion of its portfolio.

Q: What other businesses does Amazon operate in?

A: Amazon operates in e-commerce, cloud computing, video and music streaming, and healthcare, among other areas.

Q: Why is Amazon a good investment opportunity?

A: Amazon has a strong track record of generating consistent earnings and cash flow, and it has a proven ability to uncover new growth avenues.

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