Warren Buffett's $135 Billion AI Investment: A Once-in-a-Generation Opportunity?

Billionaire Warren Buffett Has $135 Billion Invested in Just 1 Artificial Intelligence (AI) Stock. Is It Time to Buy?

Warren Buffett is one of the most closely followed and studied investors in history. Since 1965, he's led investment conglomerate Berkshire Hathaway and helped generate an overall return of 4,384,748%. It's fair to say that Buffett knows a thing or two about picking stocks. Some of the hallmarks of Buffett's portfolio include financial services, energy businesses, and consumer goods companies. By contrast, one sector that Buffett notably stayed away from for years is technology. However, in 2016, the Oracle of Omaha made a splash by revealing a massive position in Apple (NASDAQ: AAPL). Less than a decade later, the iPhone maker is now Buffett's largest position -- worth roughly $135 billion and accounting for nearly 41% of his total portfolio. Let's dig into why Buffett loves Apple stock so much, and assess if now is a good time for investors to scoop up some shares. Buffett's investment philosophy is surprisingly simple You don't need to be good at picking individual stocks to mimic Buffett's success. In fact, much of Buffett's investment philosophy revolves around exercising patience and discipline as opposed to trying to identify the "next big thing." Besides Apple, some of Buffett's largest positions include Coca-Cola, American Express, Occidental Petroleum, Bank of America, and Chevron. The first key item to recognize here is that Buffett is well diversified. What's more important, however, is taking a look at how long Buffett has owned some of these companies. For example, Buffett has owned Coca-Cola stock since 1988. Although Coca-Cola may be seen by many as a mundane business, Buffett has enjoyed generous returns over the decades thanks to Coca-Cola's reliable, steady growth and dividend program. Apple is a bit of a different story, though. Buffett has owned Apple stock for less than a decade, and yet it's already ballooned into his largest position. Clearly, Apple has experienced outsize price appreciation in recent years. Now, with artificial intelligence (AI) taking the spotlight in the technology sector, could investors be looking at a generational opportunity in Apple right now? The main thread stitching these investments together is that Microsoft, Amazon, and Alphabet compete fiercely with one another in the cloud computing landscape. Unlike its peers above, Apple remained suspiciously quiet as it related to its AI ambitions. Considering the company's sales have been in decline for about a year now, I found the lack of an AI roadmap to be unnerving. However, about a month ago during its Worldwide Developers Conference (WWDC), management finally provided investors with a preview of Apple Intelligence -- the company's long-awaited strategy around AI. Apple will be partnering with OpenAI to integrate ChatGPT across its suite of hardware products as it looks to bring AI-powered applications to the masses. Apple's WWDC took place from June 10 to June 14. And since June 10, shares of Apple have soared by 16%. Unsurprisingly, over the last month many Wall Street analysts have revamped and upgraded their price targets for Apple stock as well. Is the premium valuation worth it? As illustrated in the chart below, Apple's price-to-earnings (P/E) and price-to-free-cash-flow (P/FCF) multiples are significantly higher today than they were just a year ago. It's hard for me to justify these premium multiples considering Apple has shown little in the way of growth or innovation for quite some time. AAPL PE Ratio data by YCharts On the surface, it looks like investors are encouraged by the bullish sentiment surrounding Apple Intelligence that has led to significant buying activity in the stock. While it can be tempting to follow, buying into momentum is seldom a good strategy. One other aspect that makes Buffett such a great investor is that he is a contrarian. Buffett does not follow the crowd or chase lofty valuations. While Apple Intelligence is an intriguing development, the company has yet to show any tangible results from it yet. Furthermore, the initial Apple Intelligence product suite isn't set to be released until the fall. To me, it looks like investors are buying more into the story around Apple Intelligence, and the current outsize buying activity is rooted in emotional hype as opposed to prudent logic. While the rising price in Apple stock is good for Berkshire and Buffett, I don't think it's warranted at the moment. Should the company begin to show a turnaround in sales, and perhaps later this year start translating Apple Intelligence into a significant source of growth, scooping up shares could be a good idea. But for now, I would not initiate a position in Apple or add to an existing one. The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now... and Apple wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $722,626!* Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. American Express is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adam Spatacco has positions in Alphabet, Amazon, Apple, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Bank of America, Berkshire Hathaway, Chevron, and Microsoft. The Motley Fool recommends Occidental Petroleum 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. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

A Once-in-a-Generation Investment Opportunity: Why I Think This Warren Buffett and Cathie Wood Artificial Intelligence (AI) Stock Will Be the Best "Magnificent Seven" Opportunity for Decades to Come

When it comes to institutional money managers, Ark Invest CEO Cathie Wood and Berkshire Hathaway CEO Warren Buffett are two of the most closely followed. Despite their notable reputations, Wood and Buffett have very little in common. Buffett built his fortune primarily investing in blue chip businesses that generate steady cash flow. Conversely, Wood has a knack for making higher-risk bets in emerging technologies. Nevertheless, there is one thing that Wood and Buffett have in common: They both own shares in Amazon (NASDAQ: AMZN). While Amazon is not a core position for either Wood or Buffett, I find it interesting that the e-commerce and cloud computing specialist is the only Magnificent Seven stock that both investors own. Let's dig into what makes Amazon such a unique opportunity right now as excitement around artificial intelligence (AI) continues to play out. Microsoft kicked off the AI revolution with its $10 billion investment in ChatGPT developer OpenAI. Moreover, Nvidia's graphics processing units (GPUs) are being rapidly deployed by some of the world's largest companies around the globe. Although I understand why Wall Street analysts and financial media pundits have covered Microsoft and Nvidia endlessly, I think opportunities such as Amazon have gone largely overlooked. Piles and piles of cash The chart below illustrates Amazon's operating cash flow on a trailing-12-month basis over the last several years. For the quarter ended March 31, Amazon's operating cash flow rose 82% year over year to $99.1 billion. AMZN Cash from Operations (TTM) data by YCharts Furthermore, the company's free cash flow has soared to $50 billion for the trailing-12-month period ended March 31. Considering Amazon was burning cash just a year prior, the rapid turnaround to such a robust financial position is impressive. Let's take a look at how Amazon is investing some of its newfound profits, and why I think the company is building the foundation for long-term success. Shortly after Microsoft invested in OpenAI, Amazon followed with a move of its own -- a $4 billion investment into an AI start-up called Anthropic. As part of the deal with Anthropic, the start-up will be using Amazon's cloud infrastructure, AWS, as its primary provider. This is a game changer for AWS, and I see it as a major catalyst for the company's cloud growth -- from new products such as Amazon Bedrock as well as Amazon's homegrown Trainium and Inferentia semiconductor chips. In addition to its partnership with Anthropic, Amazon is also committing $11 billion to build out data centers in Indiana. It's clear that AI represents an entirely new frontier for AWS. Amazon is making some aggressive investments as it looks to outmaneuver Microsoft and Alphabet in the cloud computing space, as well as make a move on Nvidia in the chip arena. Although these investments are both pricey and ambitious, Amazon clearly has enough financial horsepower to double down on its AI vision and compete with its megacap peers at scale. What sticks out the most in the chart above is that Amazon's current P/FCF of 42 is about half of the company's average P/FCF multiple over the last 10 years. However, the more subtle idea here is looking at how normalized Amazon's valuation has become over the last decade in light of so many dramatic changes at the company. For starters, AWS is now a $100 billion revenue run rate business. Considering the majority of Amazon's operating profits come from AWS, it's encouraging to see this business segment thrive. Moreover, as generative AI continues to witness more demand, I think AWS' revenue growth and profits have the potential to exponentially accelerate. Outside of AWS, Amazon has also quietly built a multibillion-dollar advertising business -- an area where it can further compete with Alphabet and make inroads on Meta Platforms as well. I think many investors view Amazon through a narrow lens and are missing the broader theme as it relates to AI. Unlike many of its Magnificent Seven peers, Amazon is so diversified as a business that it has the ability to compete with all of its peers and do so in a highly profitable way. I think it's only a matter of time before these AI investments begin to show up in concrete results in the company's financials, at which point investors will begin to see Amazon emerging as a major force in AI. Of course, this could ignite some newfound enthusiasm for the stock and it could see an outsize run. To me, Amazon stock looks like a bargain compared to other big tech stocks right now and its long-term potential should not be underappreciated. The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now... and Amazon wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $722,626!* Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adam Spatacco has positions in Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Berkshire Hathaway, Meta Platforms, Microsoft, and Nvidia. The Motley Fool 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. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

A Once-in-a-Generation Investment Opportunity: Why I Think This Warren Buffett and Cathie Wood Artificial Intelligence (AI) Stock Will Be the Best "Magnificent Seven" Opportunity for Decades to Come | The Motley Fool

Amazon is one AI stock that both Cathie Wood and Warren Buffett each own. When it comes to institutional money managers, Ark Invest CEO Cathie Wood and Berkshire Hathaway CEO Warren Buffett are two of the most closely followed. Despite their notable reputations, Wood and Buffett have very little in common. Buffett built his fortune primarily investing in blue chip businesses that generate steady cash flow. Conversely, Wood has a knack for making higher-risk bets in emerging technologies. Nevertheless, there is one thing that Wood and Buffett have in common: They both own shares in Amazon (AMZN -0.34%). While Amazon is not a core position for either Wood or Buffett, I find it interesting that the e-commerce and cloud computing specialist is the only Magnificent Seven stock that both investors own. Let's dig into what makes Amazon such a unique opportunity right now as excitement around artificial intelligence (AI) continues to play out. For the last couple of years, I'd argue that the majority of AI chatter has revolved around Microsoft and Nvidia. In a way, this makes sense. Microsoft kicked off the AI revolution with its $10 billion investment in ChatGPT developer OpenAI. Moreover, Nvidia's graphics processing units (GPUs) are being rapidly deployed by some of the world's largest companies around the globe. Although I understand why Wall Street analysts and financial media pundits have covered Microsoft and Nvidia endlessly, I think opportunities such as Amazon have gone largely overlooked. The chart below illustrates Amazon's operating cash flow on a trailing-12-month basis over the last several years. For the quarter ended March 31, Amazon's operating cash flow rose 82% year over year to $99.1 billion. Furthermore, the company's free cash flow has soared to $50 billion for the trailing-12-month period ended March 31. Considering Amazon was burning cash just a year prior, the rapid turnaround to such a robust financial position is impressive. Let's take a look at how Amazon is investing some of its newfound profits, and why I think the company is building the foundation for long-term success. Shortly after Microsoft invested in OpenAI, Amazon followed with a move of its own -- a $4 billion investment into an AI start-up called Anthropic. As part of the deal with Anthropic, the start-up will be using Amazon's cloud infrastructure, AWS, as its primary provider. This is a game changer for AWS, and I see it as a major catalyst for the company's cloud growth -- from new products such as Amazon Bedrock as well as Amazon's homegrown Trainium and Inferentia semiconductor chips. In addition to its partnership with Anthropic, Amazon is also committing $11 billion to build out data centers in Indiana. It's clear that AI represents an entirely new frontier for AWS. Amazon is making some aggressive investments as it looks to outmaneuver Microsoft and Alphabet in the cloud computing space, as well as make a move on Nvidia in the chip arena. Although these investments are both pricey and ambitious, Amazon clearly has enough financial horsepower to double down on its AI vision and compete with its megacap peers at scale. What sticks out the most in the chart above is that Amazon's current P/FCF of 42 is about half of the company's average P/FCF multiple over the last 10 years. However, the more subtle idea here is looking at how normalized Amazon's valuation has become over the last decade in light of so many dramatic changes at the company. For starters, AWS is now a $100 billion revenue run rate business. Considering the majority of Amazon's operating profits come from AWS, it's encouraging to see this business segment thrive. Moreover, as generative AI continues to witness more demand, I think AWS' revenue growth and profits have the potential to exponentially accelerate. Outside of AWS, Amazon has also quietly built a multibillion-dollar advertising business -- an area where it can further compete with Alphabet and make inroads on Meta Platforms as well. I think many investors view Amazon through a narrow lens and are missing the broader theme as it relates to AI. Unlike many of its Magnificent Seven peers, Amazon is so diversified as a business that it has the ability to compete with all of its peers and do so in a highly profitable way. I think it's only a matter of time before these AI investments begin to show up in concrete results in the company's financials, at which point investors will begin to see Amazon emerging as a major force in AI. Of course, this could ignite some newfound enthusiasm for the stock and it could see an outsize run. To me, Amazon stock looks like a bargain compared to other big tech stocks right now and its long-term potential should not be underappreciated.

Billionaire Warren Buffett Has $135 Billion Invested in Just 1 Artificial Intelligence (AI) Stock. Is It Time to Buy? | The Motley Fool

Warren Buffett is one of the most closely followed and studied investors in history. Since 1965, he's led investment conglomerate Berkshire Hathaway and helped generate an overall return of 4,384,748%. It's fair to say that Buffett knows a thing or two about picking stocks. Some of the hallmarks of Buffett's portfolio include financial services, energy businesses, and consumer goods companies. By contrast, one sector that Buffett notably stayed away from for years is technology. However, in 2016, the Oracle of Omaha made a splash by revealing a massive position in Apple (AAPL 0.06%). Less than a decade later, the iPhone maker is now Buffett's largest position -- worth roughly $135 billion and accounting for nearly 41% of his total portfolio. Let's dig into why Buffett loves Apple stock so much, and assess if now is a good time for investors to scoop up some shares. You don't need to be good at picking individual stocks to mimic Buffett's success. In fact, much of Buffett's investment philosophy revolves around exercising patience and discipline as opposed to trying to identify the "next big thing." Besides Apple, some of Buffett's largest positions include Coca-Cola, American Express, Occidental Petroleum, Bank of America, and Chevron. The first key item to recognize here is that Buffett is well diversified. What's more important, however, is taking a look at how long Buffett has owned some of these companies. For example, Buffett has owned Coca-Cola stock since 1988. Although Coca-Cola may be seen by many as a mundane business, Buffett has enjoyed generous returns over the decades thanks to Coca-Cola's reliable, steady growth and dividend program. Apple is a bit of a different story, though. Buffett has owned Apple stock for less than a decade, and yet it's already ballooned into his largest position. Clearly, Apple has experienced outsize price appreciation in recent years. Now, with artificial intelligence (AI) taking the spotlight in the technology sector, could investors be looking at a generational opportunity in Apple right now? Over the last couple of years, many big tech stalwarts have made splashy moves in the AI realm. Microsoft made a $10 billion investment in OpenAI, the developer behind ChatGPT. Moreover, Alphabet and Amazon each invested in a competitor to OpenAI, Anthropic. The main thread stitching these investments together is that Microsoft, Amazon, and Alphabet compete fiercely with one another in the cloud computing landscape. Unlike its peers above, Apple remained suspiciously quiet as it related to its AI ambitions. Considering the company's sales have been in decline for about a year now, I found the lack of an AI roadmap to be unnerving. However, about a month ago during its Worldwide Developers Conference (WWDC), management finally provided investors with a preview of Apple Intelligence -- the company's long-awaited strategy around AI. Apple will be partnering with OpenAI to integrate ChatGPT across its suite of hardware products as it looks to bring AI-powered applications to the masses. Apple's WWDC took place from June 10 to June 14. And since June 10, shares of Apple have soared by 16%. Unsurprisingly, over the last month many Wall Street analysts have revamped and upgraded their price targets for Apple stock as well. As illustrated in the chart below, Apple's price-to-earnings (P/E) and price-to-free-cash-flow (P/FCF) multiples are significantly higher today than they were just a year ago. It's hard for me to justify these premium multiples considering Apple has shown little in the way of growth or innovation for quite some time. On the surface, it looks like investors are encouraged by the bullish sentiment surrounding Apple Intelligence that has led to significant buying activity in the stock. While it can be tempting to follow, buying into momentum is seldom a good strategy. One other aspect that makes Buffett such a great investor is that he is a contrarian. Buffett does not follow the crowd or chase lofty valuations. While Apple Intelligence is an intriguing development, the company has yet to show any tangible results from it yet. Furthermore, the initial Apple Intelligence product suite isn't set to be released until the fall. To me, it looks like investors are buying more into the story around Apple Intelligence, and the current outsize buying activity is rooted in emotional hype as opposed to prudent logic. While the rising price in Apple stock is good for Berkshire and Buffett, I don't think it's warranted at the moment. Should the company begin to show a turnaround in sales, and perhaps later this year start translating Apple Intelligence into a significant source of growth, scooping up shares could be a good idea. But for now, I would not initiate a position in Apple or add to an existing one.