Warren Buffett Has 23% of Berkshire Hathaway's Portfolio Invested in 2 AI Stocks Up 600% and 900% in the Last Decade

Warren Buffett has nearly 23% of Berkshire Hathaway's portfolio invested in two artificial intelligence (AI) stocks: 21.8% is allocated to Apple (NASDAQ: AAPL), a stock that soared 600% in the last decade, and 0.8% is allocated to Amazon (NASDAQ: AMZN), a stock that soared 900% in the last decade.

Here's what investors should know about Apple and Amazon.

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Apple: 21.8% of Berkshire Hathaway's portfolio

The investment thesis for Apple has two parts. First, the company is the global leader in smartphone sales, a position it achieved through engineering expertise that spans hardware and software. Apple has cultivated a significant brand moat that affords the company great pricing power but must maintain its premium status with consumers to be a worthwhile investment.

Second, Apple aims to monetize its installed base exceeding 2.35 billion devices with add-on services like iCloud storage, Apple Care, Apple Pay, and App Store content, as well as subscription products like Apple TV+. Within the services segment, many analysts expect Apple to eventually monetize artificial intelligence.

To elaborate, late last year, the company introduced Apple Intelligence, a suite of AI features that CEO Tim Cook said would usher in a "new era for the iPhone." Apple Intelligence was initially free, but many analysts speculated Apple would eventually monetize more sophisticated features as a subscription offering.

However, consumers have been relatively unmoved by the platform. In fact, iPhone sales have essentially been flat over the last six months despite many pundits predicting a massive upgrade cycle. One reason for the lackluster response may be the absence of the much-touted upgrades to the conversational assistant Siri, including the ability to understand personal context and take action within other apps.

In May, Bloomberg reported that internal data showed Apple was years behind the competition in terms of developing a ChatGPT competitor, and the timeline for the Siri upgrades is still unknown. "The planned rollout was delayed until May and then indefinitely, even as features were still being promoted on commercials for the iPhone 16," according to Bloomberg.

Last month, Apple announced plans to open its Apple Intelligence large language models to third-party developers. Doing so should bring a wave of AI-powered applications to the App Store, letting Apple indirectly monetize AI. Of course, the ability to make money on AI is only part of the investment thesis, so prospective investors need to consider the big picture.

Wall Street has downwardly revised estimates due to tariff uncertainty, such that earnings are expected to grow at 6% annually through fiscal 2026, which ends in September 2026. That makes the current valuation of 28 times earnings look rather expensive. I think investors should pass on the stock until the price drops meaningfully or tariff uncertainty dissipates and earnings estimates increase.

Amazon: 0.8% of Berkshire Hathaway's portfolio

The investment thesis for Amazon centers on its strong position in three industries. First, it runs the largest e-commerce marketplace outside of China, and its market share in the United States is forecast to surpass 40% this year. Second, it's the largest retail advertising company in the world, with nearly 40% market share. And third, Amazon Web Services (AWS) is the largest public cloud in terms of infrastructure and platform services revenue, with 29% market share.

Amazon is using AI to improve efficiency and grow margins in its retail business. CEO Andy Jassy says the company is building about 1,000 generative AI applications, including tools to optimize coding, customer service, inventory allocation, last-mile delivery, and warehouse robots. Morgan Stanley recently called Amazon's retail business the "most underappreciated" generative AI beneficiary in the technology space.

Similarly, Amazon is leaning into demand for AI in its cloud computing business. The company has developed custom semiconductors for AI training and inference that offer better price performance than the leading graphics processing units (GPUs), according to management. AWS has also introduced a generative AI development platform called Bedrock, which complements its machine learning service SageMaker. Finally, AWS has introduced a coding and business assistant called Amazon Q.

Andy Jassy views AI as the most profound technology shift and business opportunity since the internet. "Our AI business has a multibillion-dollar annual revenue run rate, continues to grow triple-digit year-over-year percentages, and is still in its very early days," he told analysts on the first-quarter earnings call.

Wall Street estimates Amazon's earnings will increase at 10% annually through 2026. That makes the current valuation of 35 times earnings look expensive, but I think analysts are underestimating the company.

Amazon beat the consensus estimate by an average of 21% over the last six quarters. I think that trend will continue as investments in AI drive revenue growth and margin expansion.

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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. Trevor Jennewine has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Apple, and Berkshire Hathaway. The Motley Fool has a disclosure policy.