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Warren Buffett has crushed the benchmark S&P 500 in the return department since the mid-1960s.
Berkshire Hathaway's $294 billion portfolio houses two artificial intelligence (AI) stocks that Buffett has roughly $66 billion invested in.
Additionally, Buffett's "secret" portfolio has stakes in three additional market-leading AI stocks.
Since the mid-1960s, Berkshire Hathaway's (NYSE: BRK.A)(NYSE: BRK.B) Warren Buffett has been consistently outpacing the benchmark S&P 500 in the return department. As of the closing bell on July 10, the Oracle of Omaha has overseen a cumulative return in his company's Class A shares (BRK.A) of 5,873,451% since becoming CEO. In comparison, the broad-based S&P 500 is higher by around 42,000%, including dividends, over the same timeline.
Buffett's outperformance has led to a large following on Wall Street who wait impatiently to find out which stocks he's buying and selling on a quarterly basis.
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Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
While Buffett is a staunch value investor who traditionally puts his company's capital to work in mature businesses often found in the financial or consumer staples sectors, you might be surprised to learn that Berkshire Hathaway's billionaire chief also owns shares of five preeminent artificial intelligence (AI) stocks -- but there is a bit of a catch to this figure.
When investors follow Warren Buffett's buying and selling activity, they're commonly doing so thanks to quarterly filed Form 13Fs with the Securities and Exchange Commission. These filings provide a roadmap of the buying, selling, and holding activity within Berkshire's $294 billion investment portfolio that Buffett oversees.
Contained among the more than three dozen stocks held in this primary investment portfolio are two premier AI stocks that account for a combined $66 billion of Berkshire's invested assets:
Make no mistake about it, neither company was purchased because of their respective AI ties. Rather, Buffett and his team value company traits like sustainable moats, loyal customers, and phenomenal capital-return programs as far more enticing than the AI revolution.
Apple has the world's leading share repurchase program. Since kicking off its buyback program in 2013, it's bought back $775 billion worth of its common stock and reduced its outstanding share count by more than 43%. Companies that aggressively repurchase their stock incent long-term investing (which Buffett loves) and incrementally increase the ownership stakes of existing shareholders.
Customers have also demonstrated incredible loyalty to the Apple brand. The iPhone has accounted for a 50% or greater share of domestic smartphone sales since a 5G-capable version was introduced during the fourth quarter of 2020. Further, Apple's focus on subscription services has helped bolster its margins.
Meanwhile, Amazon's bread-and-butter is its world-leading cloud infrastructure service platform, Amazon Web Services (AWS). Though Amazon is best-known for its online marketplace, it's AWS that generates the most-consistent growth and the lion's share of its operating income.
Though Apple is incorporating its AI model (Apple Intelligence) into its physical devices, and Amazon is allowing its AWS clients to utilize generative AI solutions and to train large language models (LLMs), these factors are just gravy on the meat and potatoes that initially attracted Buffett and his top advisors to these two companies.
Image source: Getty Images.
You'd think Berkshire Hathaway's 13F would tell the complete story about what's under Warren Buffett's hood -- but you'd be wrong.
In 1998, Buffett's company acquired reinsurance giant General Re in a $22 billion all-share deal. Though the reinsurance operations were the reason this deal was made, General Re was also the parent of a specialty investment firm known as New England Asset Management (NEAM). When the deal closed in December 1998, Berkshire Hathaway became NEAM's new parent company.
Unlike Berkshire's $294 billion portfolio, Warren Buffett doesn't oversee the $616 million investment portfolio of New England Asset Management. Nevertheless, what NEAM owns is, ultimately, part of Berkshire Hathaway. In a roundabout way, this makes New England Asset Management Warren Buffett's "secret" portfolio.
While this secret portfolio is primarily invested in brand-name consumer and financial stocks, as well as diversified exchange-traded funds (ETFs), it also has small positions in three preeminent AI stocks (as of March 31):
These companies have made their presence known in the AI arena in a variety of ways. Broadcom is the leading provider of networking solutions responsible for connecting tens of thousands of graphics processing units in enterprise data centers to reduce lag and maximize compute potential. Meanwhile, Microsoft and Alphabet have the respective No.'s 2 and 3 cloud infrastructure service platforms (by spending) behind AWS. Both companies are incorporating generative AI and LLM solutions into their respective platforms for their clients.
But once again, it's highly unlikely that NEAM's money managers purchased shares of this trio because of their AI ambitions. Rather, it's because Broadcom, Microsoft, and Alphabet have rock-solid foundations beyond the evolution of AI.
For instance, Broadcom is a top provider of wireless chips and accessories used in next-generation smartphones, as well as networking and optical components for the industrial sector, including the auto industry.
Microsoft's cloud infrastructure service platform Azure was thriving long before AI became the hottest thing since sliced bread. Microsoft's cloud services and legacy operations, which includes Windows and Office, are still generating copious amounts of operating cash flow.
As for Alphabet, its Google search engine has maintained an 89% to 93% share of global internet search dating back more than a decade. Between Google and video streaming platform YouTube, which is the second most-visited social site, Alphabet enjoys a solid ad-driven foundation.
Though Warren Buffett remains a traditional investor whose focus is on value stocks and predominantly consumer-facing businesses, he nevertheless, directly and indirectly, holds stakes in five premier artificial intelligence stocks.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Sean Williams has positions in Alphabet and Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, and Microsoft. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
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