Berkshire Hathaway holds Alphabet and Amazon in its portfolio.
Warren Buffett might just be the greatest investor of all time. Between 1964 and 2024, Buffett’s investment conglomerate, Berkshire Hathaway, generated an overall gain of 5,502,284% compared to the S&P 500‘s 39,054% appreciation.
With such an epic performance, I think it’s fair to say that when Buffett picks a stock for his portfolio, it’s probably a good idea to try and understand what the Oracle of Omaha sees. While Berkshire has always limited its exposure to volatile growth stocks — particularly in the technology sector — two positions are beginning to stick out to me.
Let’s break down the two quantum computing stocks that have caught Buffett’s eye and assess if they are good buys right now.
1. Alphabet
A couple of weeks ago, Berkshire published its 13F filing for the third quarter. A 13F is a required disclosure that breaks down which stocks institutional investment funds with over $100 million in stocks bought and sold during the most recent quarter.
Throughout the artificial intelligence (AI) revolution, Buffett has remained on the sidelines — stockpiling record sums of cash instead of chasing frothy momentum stocks. However, Berkshire’s most recent filings revealed a new position: internet giant Alphabet (GOOGL +0.06%) (GOOG 0.05%). Interestingly, Berkshire’s $4.3 billion investment in Alphabet was the only new stock Buffett added to the portfolio during the third quarter.
To date, Alphabet’s AI progress is most easily seen in its core products across search and cloud computing. For instance, Google has changed its interface to look a lot like that of ChatGPT — integrating an AI mode whereby users input a query and receive an AI-generated response as opposed to clicking through individual webpages on their own.
In addition, Google Cloud Platform (GCP) competes heavily with Microsoft Azure, Amazon Web Services (AWS), and to a degree, even rivals Nvidia thanks to Alphabet’s custom silicon hardware — called Tensor Processing Units (TPUs).
Beyond these product segments, Alphabet is quietly developing its own quantum AI stack. The company has designed its own chip, called Willow, and also introduced an open-source quantum software suite to developers, called Cirq.
Image source: Getty Images.
2. Amazon
Outside of Alphabet, Buffett’s most direct exposure to AI and quantum computing is Berkshire’s position in Amazon (AMZN +1.77%). Just like Alphabet, Amazon’s AI roadmap primarily revolves around its existing offerings: e-commerce and cloud infrastructure.
On the e-commerce side, Amazon uses AI to analyze consumer shopping data in order to refine its recommendation algorithms. In cloud computing, Amazon has invested billions into a start-up called Anthropic, which has become a lucrative tailwind for emerging services introduced to the AWS suite.
Amazon has also designed its own custom quantum computing chip, called Ocelot. Moreover, the company introduced a quantum AI platform within AWS called Amazon Bracket, which can integrate with pure-play architectures from IonQ.
Image source: The Motley Fool.
What do Alphabet and Amazon have in common?
While many perceive Buffett as some sort of stock-picking genius, the acclaimed investor actually subscribes to a simple formula. In addition to not following the crowd — what some call contrarian investing — Buffett is a stickler for value. In other words, Berkshire does not allocate capital toward overstretched valuations.
Furthermore, Buffett is always thinking about the long run. He is not known for trading, nor does he invest in vulnerable businesses that hinge on a singular product or customer demographic. When taken together, it becomes clear that Buffett seeks out durable and diversified businesses that are positioned for any economic cycle — all for a reasonable price.
While Berkshire now has exposure to AI, and by extension, the quantum computing revolution, it’s highly unlikely that these factored much into Buffett’s thesis.
Instead, Buffett is attracted to both Alphabet’s and Amazon’s formidable ecosystems that span a number of critical services used by consumers on a daily basis: e-commerce, consumer electronics, entertainment, streaming, gaming, cloud computing, enterprise software, advertising, logistics and delivery, and so much more.
AMZN PE Ratio (Forward) data by YCharts
Considering both Alphabet and Amazon are experiencing some compression in their valuation multiples, it could be argued that investors are not fully pricing in the long-run potential of each company’s growth prospects in the AI era.
I think these dynamics compelled Buffett to pounce on Alphabet and complement Berkshire’s existing technology ecosystem positions, Amazon and Apple. All of these companies have proven to be resilient, cash-generating machines over the last several decades, all while commanding a level of global brand recognition that is tough to rival.
Against this backdrop, I see Alphabet and Amazon as compelling positions to buy and hold for the long run — with or without AI factoring into the equation.