Buyers are keen to leverage the potential growth offered by artificial intelligence, driving up stock bids for AI giants like Nvidia, Microsoft, and Alphabet throughout 2023 and into 2024. However, what does Warren Buffett, widely regarded as one of the greatest investors in history, think about the impact of AI?
Below are insights into Buffett’s views on artificial intelligence and its implications for investment as well as comments from his late partner, Charlie Munger.
Warren Buffett’s Perspective on Artificial Intelligence
During an interview with CNBC in April 2023, Buffett admitted, “I think it’s something I don’t understand at all.”
Buffett was amazed by the capabilities of ChatGPT when Microsoft’s Bill Gates introduced it to him, acknowledging the significant time-saving potential across various tasks.
He expressed his astonishment, stating, “It’s read every book, every legitimate mind. It’s unbelievable.” While acknowledging AI’s remarkable technological progress, Buffett remained uncertain about its future implications, humorously mentioning that he hopes someone will “unplug it” if it poses a threat to society.
Notably, Buffett heeded Eric Schmidt’s cautionary remarks regarding the existential risks associated with AI, emphasizing, “If it scares him, it scared me.”
Charlie Munger’s Stance on Artificial Intelligence
Charlie Munger, the longtime partner and vice chairman of Berkshire Hathaway who passed away in November 2023, adopted a cautious approach towards the hype surrounding artificial intelligence.
In February 2023, Munger highlighted the importance of AI while cautioning against excessive enthusiasm, noting, “Artificial intelligence won’t cure cancer. It won’t achieve all our aspirations. It also contains a lot of nonsense.”
Buffett’s Investment Philosophy: Steer Clear of Shifts
Buffett often refrains from actively engaging with cutting-edge technologies or rapidly evolving companies, preferring a more conservative approach. While Berkshire Hathaway is now a major Apple shareholder, Buffett has faced criticism for his delayed recognition of the value in certain tech firms.
According to Buffett, the key to successful investment lies in evaluating a business’s competitive advantage and its enduring strength rather than predicting industry disruptions or growth trends. He emphasizes the importance of identifying what will remain unchanged in contrast to companies poised to benefit from new technologies.
Buffett’s historical perspective underscores that while industries may revolutionize society, they do not always translate into profitable investments for shareholders. He cites examples like airlines and automakers, which, despite transforming the world, have not consistently delivered returns to investors.
Munger’s belief in the efficacy of traditional intelligence over AI was evident during the 2023 Berkshire annual meeting when he emphasized the enduring value of conventional wisdom.
Considerations for AI-Driven Investment Strategies
With the emergence of AI tools like ChatGPT and Google’s Bard, investors may explore incorporating AI into their decision-making processes. While these tools offer efficiency in processing vast amounts of data and providing insights, their predictive capabilities remain limited compared to human foresight.
Investors should exercise caution as AI-generated insights, while seemingly accurate, may occasionally contain erroneous information. Verifying data from AI models is crucial before basing investment decisions on their recommendations. While AI can complement investment analysis, human judgment remains indispensable, especially during market downturns, where the expertise of financial advisors excels.
