Warren Buffett's Entanglement with AI through His Preferred Stock

Warren Buffett, the seasoned investor known for his traditional investment choices, holds a cautious view on artificial intelligence (AI). Despite his hesitation about the potential misuse of AI, some of Berkshire Hathaway's largest investments are in companies at the forefront of AI development and its proliferation.

Buffett's Affection for Apple

One company stands out as Buffett's top AI pick: Apple Inc. At Berkshire Hathaway's annual shareholder meeting, Buffett expressed his high regard for Apple, noting that it's 'a better business than any we own.' Apple's significant role in Buffett's portfolio is undeniable, with Berkshire owning approximately 5.9% of Apple's shares. Even amidst stock repurchases by Apple's management, Berkshire's stake continues to grow.

Buffett acknowledges a misstep in selling some Apple shares in 2020 for tax reasons, especially considering the stock's significant appreciation since then. He holds the iPhone in particularly high regard, emphasizing how it's become a staple of modern life and has a distinctive affinity from consumers that none of his other holdings can match. Apple's dominance in the smartphone market, coupled with its longevity and strong brand, underline its competitive edge.

Apple: A Stealthy AI Contender

Although Buffett primarily sees Apple as a consumer goods company selling beloved technology products, the tech giant's substantial investments in AI underscore its role as an influential player in the field. For instance, Apple's annual investment nearing $1 billion on AI initiatives—including their own language models and chatbot technologies—might be a fraction of their vast financial reserves but represents significant R&D efforts. These enhancements are especially apparent in their latest chip designs, like the M3 chips for Macs, which propel AI processing abilities and thus appeal to AI developers.

The iPhone and MacBook advancements expectedly strengthen the use of on-device AI, promoting the security of user information and enabling a plethora of AI applications. What this means for Apple, and why it excites Buffett, is the enrichment of their services business, which is positioned for growth through the ongoing integration of AI into daily life.

Apple's trajectory, buoyed by AI, is likely to generate further growth phases, much as it did with the smartphone revolution. Certainly, for Warren Buffett, Apple represents not just a successful investment but a vision of a company adeptly bridging the gap between consumer goods and cutting-edge technology.

Buffett, Apple, AI