Warren Buffett and Cathie Wood are similar. At least, that’s the case if the similarity spanned millions of miles and the two renowned investors were on opposite ends of it.
Buffett and Wood have differing opinions on many stocks. However, there’s one standout exception. Here’s the lone artificial intelligence (AI) stock that both Buffett and Wood possess as 2024 begins.
Minor positions for both well-known investors
Wood’s Ark Invest portfolio is full of AI stocks. That’s not surprising, considering that Wood has been a vocal advocate of AI for years. It’s a different story with Buffett. The legendary investor is well-known for focusing only on stocks that are in his area of expertise. AI definitely doesn’t qualify.
But there is one — and only one — AI stock that both investors own. Admittedly, however, their holdings in this stock are quite small.
Amazon (NASDAQ: AMZN) makes up 0.4% of Buffett’s Berkshire Hathaway portfolio. While Berkshire initiated a position in Amazon in 2019, Buffett acknowledged at the time that the decision was made by one of the conglomerate’s two investment managers. Still, he likes the company and the stock, telling CNBC, “Yeah, I’ve been a fan, and I’ve missed opportunities.”
Wood’s position in Amazon is even smaller. And the stock isn’t in any of her exchanged-traded funds (ETFs) that focus heavily on AI. Instead, Amazon is included in the Ark Space Exploration & Innovation ETF. The company’s Project Kuiper satellite broadband network apparent drew Wood’s attention.
Amazon’s AI narrative
Amazon isn’t new to the world of AI. The company has developed and used AI for over two decades.
AI permeates the algorithms used on Amazon’s e-commerce platform. Every time a user sees a suggestion for a product to buy, it’s an example of the company’s AI at work. The e-commerce giant recently enhanced its performance on this front, launching a generative AI tool to respond to shoppers’ questions about products.
Amazon introduced its Alexa virtual assistant way back in 2014. Alexa is embedded in the company’s Echo, Firestick, and Kindle Fire devices.
The larger AI opportunity for Amazon, however, is with its cloud services platform, Amazon Web Services (AWS). CEO Andy Jassy emphasized why AWS could be such a big winner in AI in his comments during the company’s third-quarter earnings call. He stated, “[C]ustomers want to bring the [AI] models to their data, not the other way around. And much of the data resides in AWS as the distinct market segment leader in cloud infrastructure.”
Is Amazon a prudent choice for less recognized investors?
Buffett’s Berkshire Hathaway lessened its position slightly in Amazon in the third quarter of 2023. Wood’s Ark Invest issued a report several months ago that downplayed well-known AI stocks such as Amazon in favor of smaller up-and-comers. However, I believe that there are several reasons to buy Amazon stock right now.
The company’s net income continues to improve significantly. Amazon’s management has concentrated intently on boosting profits by streamlining operations across the board. Those efforts are paying off, as evidenced by earnings more than tripling year over year in 2023 Q3.
Jassy has said in the past that approximately 90% to 95% of global IT spending is still on-premises with the rest in the cloud. He believes those numbers will flip over the next 10 to 15 years. I suspect he’s correct. If so, AWS should have massive growth prospects ahead.
Last, but not least, Amazon hasn’t stopped looking for ways to expand into new markets. Just last year, the company launched a supply chain management service, introduced a primary care service for Prime members, and announced that it will sell cars online. I anticipate more expansions in the future.
My perspective is that Buffett and Wood would be wise to add to their holdings in Amazon. And I think the AI stock is a wise choice for less recognized investors, too.
Should you invest $1,000 in Amazon right now?
Before you buy stock in Amazon, consider this:
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 massive returns in the coming years.
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 tripled the return of S&P 500 since 2002*.
See the 10 stocks
*Stock Advisor returns as of January 16, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Keith Speights has positions in Amazon and Berkshire Hathaway. The Motley Fool has positions in and recommends Amazon and Berkshire Hathaway. The Motley Fool has a disclosure policy.
Here’s the Only Artificial Intelligence (AI) Stock That Warren Buffett and Cathie Wood Both Own As 2024 Begins was originally published by The Motley Fool