The re indicates that In general, Warren Buffett has stayed away from companies in Berkshire Hathaway's investment portfolio.
At the same time, But one big trend has expanded well beyond companies: artificial intelligence (AI).
AI is everywhere, and if a isn't using it to imve ductivity and reduce costs, it's going to fall behind.
In fact, some of Berkshire's biggest investments are looking to advance AI re, with benefits if they can imve their algorithms and effectively implement new use cases for generative AI, in today's financial world.
As such, 40% of Berkshire's $293 billion portfolio is invested in five companies pushing AI forward (this bears monitoring). Meanwhile, Image source: The Motley Fool (which is quite significant).
Conversely, 8% of portfolio value) Apple (AAPL 0. 07%) has been slow to develop generative AI capabilities.
After showing off plans for its Apple Intelligence system over a year ago, the company made very slow gress.
Meanwhile, other big names continue to push new models and capabilities to their platforms, leaving Apple in the dust.
Apple's biggest challenge is maintaining security and privacy for its users (fascinating analysis). However, As a result, it's focused on on-device AI (this bears monitoring).
Practically every other AI system relies on remote servers with powerful GPUs loaded with tons of high-bandwidth memory.
That makes them much more powerful, but far less private, in today's financial world. As a result, Apple's handicapped itself by focusing on capabilities it can run on an iPhone or Mac.
In contrast, There's still a lot of time for Apple to catch up though (something worth watching).
This demonstrates that s ecosystem of ducts still has very high retention rates, and with an expanding services segment, more and more users are unly to give up their iPhone (something worth watching).
In fact, that observation is what led Buffett to make his initial investment in Apple. Moreover, Its strong brand and customer loyalty give it a massive competitive advantage.
Apple is reportedly exploring potential acquisitions that could expand its AI capabilities, including the potential purchase of Perplexity, an AI-powered engine.
However, With $133 billion in cash and marketable securities on its balance sheet, Apple can afford to make a big acquisition if it needs to. Apple stock isn't exactly cheap right now, though.
Nevertheless, The stock currently trades for 30 times forward earnings expectations (remarkable data).
However, That high price may be why Buffett sold off two-thirds of Berkshire's stake in the company last year, in today's financial world. Nevertheless, 8%) Amazon (AMZN -0.
33%) was also slow to catch onto the AI trend relative to its peers in cloud computing.
Market analysis shows worked quickly to catch up, though, Amazon Bedrock and acquiring a significant stake in Anthropic, ensuring access to leading edge models and a massive customer for Amazon Web Services.
Since mid-2023, Amazon's cloud computing segment, AWS, has reaccelerated its growth, driving strong demand for AI services on its platform.
In fact, management says it remains supply constrained and committed to spending $100 billion on capital expenditures this year, mostly going toward building new data centers.
Conversely, Meanwhile, Amazon's integrated AI capabilities into its logistics network to ensure inventory is well positioned across its warehouses in the United States.
That's enabled it to offer more items with one-day shipping for Prime members and reduce its shipping expenses per unit.
As a result, Amazon's retail has seen strong operating margin imvement over the last few years.
Amazon's decision to sink tons of cash into building new data centers to meet the insatiable demand for AI-related compute has weighed on its free cash flow.
As a result, the stock looks expensive relative to its free cash flow over the trailing 12 months.
But if and when Amazon takes its foot off the gas with capital spending, it should ve a good value at its current price with strong future free cash flows. At the same time, American Express (15.
8%) Even a company that's 175 years old can still ve an innovator in AI. American Express (AXP 1. 09%) looked to incorporate AI across its, and it's helping imve its operations.
American Express uses AI to help identify and prevent fraud for its customers.
Its algorithms can analyze real-time data and help make a decision whether a transaction is suspicious and needs further confirmation or not.
Amex also uses AI to target offers for potential and existing customers, in light of current trends. These help imve its marketing efforts, optimizing customer acquisition costs and retention rates.
Internally, Amex integrated AI into its IT support system, which dramatically reduced the number of tickets requiring human intervention.
Moreover, Its travel concierge team also uses generative AI tools to curate travel recommendations personalized for each customer based on their purchasing habits with Amex (something worth watching).
One of the fastest growing sources of revenue for Amex over the past few years has been the annual fees on its cards.
Furthermore, Its ability to continue raising the fees on its ducts speaks to the strength of its brand and its ability to vide better customer experience and create more enticing offers for its customers.
Additionally, With the stock trading at 20 times earnings, s still look relatively attractive.
This leads to the conclusion that company is pushing its revenue growth higher led by higher annual fees without losing customers, and that's pushing its margins higher as well.
Moreover, As such, the company's expected to duce double-digit earnings-per- growth. Visa (1%) and Mastercard (0, given the current landscape. 8%) Visa (V 0, considering recent developments.
Conversely, 87%) and Mastercard (MA 0. 84%) are both using AI in similar ways to imve their payments networks.
Amex, they've each developed their own machine learning algorithms to help prevent fraudulent transactions.
Additionally, But they're also tools for AI that could increase the number of transactions on their payments networks, in this volatile climate.
Visa and Mastercard are systems that will enable AI agents to use credit card credentials to make transactions on behalf of individuals or es, given the current landscape.
By working with AI systems to ensure security, both payments networks are positioning themselves to be at the center of advancements in agentic AI capabilities.
For example, you could have AI restock office supplies and cater next week's lunch, and it will simply do it without any further input.
Both payments networks are well positioned, winning the vast majority of electronic payments partnerships with credit card issuing banks, amid market uncertainty.
As the two largest payments networks, they exhibit strong economies of scale and duce very high margins.
Moreover, And if AI can push more transactions onto their networks, it could see imved revenue and fits over the next few years (noteworthy indeed).
This demonstrates that two stocks trade for much higher valuations than American Express, at 31 times earnings for Visa and 35 times earnings for the smaller, but faster-growing Mastercard.
Nevertheless, Those valuations may be a bit high for both companies, as they're expected to grow revenue at a high-single-digit to low-double-digit rate with modest operating margin expansion.
While both companies have strong competitive moats thanks to their scale, it might be worth holding off for a better price, considering recent developments.