Billionaire Warren Buffett Has Over $75 Billion Invested in 3 "Magnificent" Artificial Intelligence (AI) Stocks

For the better part of the last six decades, Berkshire Hathaway's (NYSE: BRK.A)(NYSE: BRK.B) soon-to-be-retiring billionaire CEO, Warren Buffett, has been dazzling Wall Street with his investing prowess. On a cumulative basis, the Oracle of Omaha has overseen a gain of 6,162,558% in Berkshire's Class A shares (BRK.A), as of the closing bell on Dec. 1.

Much of this outperformance is the result of Buffett staying true to his investment philosophies, which include buying for the long term, seeking out businesses with sustainable moats, and always focusing on value.

Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.

Historically, companies in the financial and consumer staples sectors have been the go-to for Berkshire's billionaire boss. But with artificial intelligence (AI) driving much of the S&P 500's and Nasdaq Composite's gains in recent years, you might be surprised to learn that Buffett has, at least inadvertently, made a massive wager on the future of AI.

More than $75 billion out of Berkshire Hathaway's $312 billion investment portfolio can be traced back to just three "magnificent" artificial intelligence stocks (all market values as of Dec. 1).

1. Apple: $67.44 billion

When it comes to sustainable moats, the "Magnificent Seven" check all the right boxes. The seven members of the Magnificent Seven are some of the largest and most influential businesses on Wall Street. Apple (NASDAQ: AAPL), which is Berkshire Hathaway's largest holding by market value, is among these seven components.

To be clear, Warren Buffett's fascination with Apple as an investment had nothing to do with its AI aspirations. Instead, it ties into the exceptional loyalty of Apple's customer base, its strong management team, a steady stream of product innovation, and the company's market-leading share repurchase program.

Companies that pay a regular dividend to their shareholders and/or repurchase their own stock are typically profitable on a recurring basis and have demonstrated their ability to successfully navigate challenging economic climates. Since Apple initiated a buyback program in 2013, it's spent a shade over $816 billion to retire nearly 44% of its outstanding shares. Buybacks are decisively boosting Apple's earnings per share and increasing the ownership stakes of long-term investors.

But Berkshire Hathaway's No. 1 holding has lofty AI ambitions, too. It's been actively integrating Apple Intelligence into its physical products, such as the iPhone, iPad, and Mac. Apple Intelligence enhances some of the company's existing tools, such as its voice assistant Siri, and introduces new applications, including AI-driven text summarization and the ability to create emojis. The expectation is that these AI tools will reignite growth in the company's physical products.

Nevertheless, Berkshire's boss has sold 74% of his company's top holding over the last two years. While it remains the No. 1 holding, Apple's sales growth weakness for its physical products, coupled with a historically high price-to-earnings (P/E) ratio, makes its stock far less appealing than when Buffett initially opened this position in the first quarter of 2016.

Image source: Getty Images.

2. Alphabet: $5.62 billion

A second member of the Magnificent Seven that's found its way into the $312 billion investment portfolio Warren Buffett oversees at Berkshire Hathaway is Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG). The 17,846,142 Class A shares (GOOGL) Buffett oversaw the purchase of during the September-ended quarter are worth approximately $5.62 billion.

Similar to Apple, Buffett's investment in Alphabet likely has little to do with AI and everything to do with its sustainable moat. Alphabet is the parent company of Google, which holds a virtual monopoly on global internet search. According to data from GlobalStats, Google has controlled 89% to 93% of worldwide internet search share over the trailing decade. This affords Google exceptional ad-pricing power.

Furthermore, Berkshire's billionaire chief is enamored with cyclical businesses. He's well aware that economic expansions last significantly longer than recessions, and tends to pack his company's investment portfolio with businesses that can take advantage of long-winded periods of growth. With 72% of Alphabet's net sales coming from ads (the company also owns streaming service YouTube), it's ideally positioned to take advantage of lengthy periods of expansion.

However, Alphabet's most exciting growth opportunity stems from its cloud infrastructure service segment, Google Cloud. This operating segment is incorporating generative AI solutions and large language model (LLM) capabilities for its clients, which appears to be accelerating a year-over-year sales growth rate that already tops 30%!

During the third quarter (i.e., when Buffett was a buyer), Alphabet stock was valued at a forward P/E ratio ranging from 16 to 22. In hindsight, this was a phenomenal bargain for a company with robust growth prospects.

3. Amazon: $2.34 billion

The third AI stock (and member of the Magnificent Seven), collectively with Apple and Alphabet, which accounts for over $75 billion of the invested assets Warren Buffett oversees, is e-commerce titan Amazon (NASDAQ: AMZN). Amazon stock has been a continuous holding for Berkshire Hathaway since the first quarter of 2019.

Keeping with the theme, the Oracle of Omaha didn't green-light the purchase of Amazon stock because of its AI ties. Rather, the lure of buying and holding Amazon shares lies in its leadership of two separate industries.

Most investors are familiar with Amazon's online marketplace. According to an estimate from UpCounting, it was projected to account for a little more than 40% of all U.S. e-commerce market share in 2025. Although online retail sales are highly competitive and typically generate low margins, Amazon's online marketplace lures billions of visitors to its website each month.

The other industry Amazon finds itself as the lead dog in is cloud infrastructure services. Whereas Alphabet's Google Cloud is the clear No. 3 in total spend, Amazon Web Services (AWS) accounts for close to an estimated third of all cloud infrastructure service spending. Amazon is aggressively deploying generative AI and LLM solutions for its subscribers in an effort to further boost the growth potential of this considerably higher-margin segment. On an annual run rate basis, AWS is pacing $132 billion in sales.

While Amazon stock isn't cheap in the same fundamental sense as Alphabet, it is historically inexpensive when examined relative to future cash flow expectations. Throughout the 2010s, investors commonly paid a median of 30 times year-end cash flow per share to own Amazon stock. Investors can buy shares today for about 12 times forecasted cash flow per share in 2026.

Sean Williams has positions in Alphabet and Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, and Berkshire Hathaway. The Motley Fool has a disclosure policy.