Warren Buffett’s famous for his pithy comments and interesting insights. However, I think it’s fair to say that the billionaire investor has yet to fully embrace the artificial intelligence (AI) revolution.
At the 2023 Berkshire Hathaway shareholders’ meeting, the company’s chairman and chief executive likened AI to a genie being let out of a bottle. And admitted that its power “scares the hell out of me”.
Out of curiosity, I asked ChatGPT to tell me what Buffett’s best quote is. It replied: “Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.“
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Not very original
Like most of the American’s quotes, I’ve heard this one before. And if I’m honest, I think it’s a bit of a silly answer. The dictionary says ‘best’ means excellent, outstanding or desirable. And while I acknowledge Buffett was trying to be funny, I don’t think it’s his number one.
I therefore went back to ChatGPT and asked: isn’t this obvious?
Although agreeing with me, the software stuck to its guns and replied: “Buffett’s quote serves as a constant reminder that, regardless of market trends or temptations for quick gains, the primary goal in investing should be the preservation of capital. This focus on risk management is a foundational yet often overlooked aspect of successful investing.”
After asking how this is achieved, the software went on to explain the importance of understanding what you invest in, thinking about the long term, and the value of diversification. Along with seeking to only buy businesses that are undervalued, these are the cornerstones of Buffett’s strategy, which he’s deployed over a lifetime of investing.
And in my opinion, sound advice.
Top of the stocks
Despite being nervous about AI, Buffett’s biggest shareholding (or more precisely, that of Berkshire Hathaway) is Apple (NASDAQ:AAPL).
It’s a company that’s invested billions in developing its own version of the technology – ‘Apple Intelligence’. And it plans to spend much more, including an unspecified amount on constructing a huge new factory in Texas to build servers for data centres. Unlike some of its products which are assembled in China, anything coming out of the US factory is likely to escape President Trump’s tariffs.
But despite these growth plans, Berkshire Hathaway’s sold approximately two-thirds of its holding in the tech giant since September 2023.
Buffett’s previously indicated that his investment vehicle’s been divesting as a means of limiting the tax it pays on capital gains. Others have interpreted this as a sign that he thinks Apple’s over-valued. It currently trades on a historical price-to-earnings ratio of around 39.
And sales of its flagship products – iPhone, iPad and Mac – are flat. Worryingly, it’s yet to replicate the historical success of these with its other products. That’s why, in my opinion, its investment in AI’s crucial.
However, despite these concerns, it’s important to remember that the company’s been written off many times before. And yet it keeps on delivering. Of the 51 analysts covering the stock, 46 say it’s a Buy or Hold.
And since February 2020, its stock price has increased by over 250%. Also, it regularly tops the polls as the world’s most valuable — and most recognisable — brand.
For these reasons, Apple’s a growth stock investors could consider adding to their portfolios and holding for the long term.
