Amazon’s Expanding Reach and AI Initiatives Catch Berkshire’s Attention, But Steady Growth and Profitability Still Matter

The article highlights that although e-commerce was Amazon’s primary business when it was founded in 1994, the company has since expanded into various areas such as cloud computing, streaming, digital advertising, and AI. Berkshire Hathaway, led by Warren Buffett, has invested in Amazon stock since 2019, but only accounts for 0.5% of its portfolio due to Buffett’s preference for companies with steady growth, profitability, and strong management teams. However, with the increasing significance of AI, Berkshire may consider increasing its stake in Amazon as the company launches AI initiatives such as Q, a virtual assistant that analyzes internal business data to provide useful insights and writes, tests, and debugs computer code to speed up software releases. Additionally, Amazon Web Services, the largest provider of cloud services by revenue globally, offers infrastructure powered by Nvidia’s GPUs and custom chips called Trainium 2, with strong demand due to their attractive pricing and performance. The article also discusses Apple’s AI endeavors, including the integration of an Apple-designed A17 Pro chip in the latest iPhone 15 Pro and possible partnerships with leading AI chatbot developers like Alphabet and OpenAI. Apple meets most of Buffett’s criteria, including steady revenue growth, high profitability, and a regular dividend, and recently announced a new stock buyback program worth $110 billion, the largest in corporate history. While Berkshire sold 13% of its position in Apple for tax reasons, Apple is expected to remain Berkshire’s largest position at the end of 2024. Before investing in Amazon, the article suggests considering the potential risks and returns involved, as well as joining The Motley Fool’s Stock Advisor service, which has quadrupled the return of S&P 500 since 2002*.