Ark Invest CEO Cathie Wood and Berkshire Hathaway CEO Warren Buffett couldn’t be any more different in their investment approaches.
Ark Invest offers investors the opportunity to invest in a number of exchange-traded funds (ETFs), many of which are weighted heavily toward speculative, unprofitable businesses. Wood’s rationale is that she and her team tend to bet on high-risk, high-reward opportunities in emerging areas, such as artificial intelligence (AI) or biotech.
By contrast, Buffett’s investment style leans heavily into the idea of identifying businesses that generate strong, steady cash flow and carry a high degree of brand appeal. Buffett tends to prefer industries such as insurance or consumer goods as opposed to higher-growth areas in the technology sector.
Nevertheless, Wood and Buffett do share one particular mega-cap tech stock. While it’s not a core position for either portfolio, both Ark Invest and Berkshire Hathaway own shares in “Magnificent Seven” member Amazon (NASDAQ: AMZN).
Is now a good time to follow Wood and Buffett and add Amazon to your portfolio? Read on to find out.
It’s been a rough start to the year for technology investors. Newly instituted tariffs, in combination with fears of inflation coming back and some recent mystifying words from Federal Reserve Chairman Jerome Powell, have investors scratching their heads about the health and future prospects of the economy. Unsurprisingly, many investors are acting upon these fearful emotions and beginning to sell off stock and raise some cash for a potentially rainy day.
AI stocks have been particularly vulnerable to the ongoing sell-off in the Nasdaq Composite. This isn’t too surprising, given that many of the mega-cap tech stocks pictured above have experienced meteoric rises for much of the last two years. As the chart above illustrates, shares of Amazon are down 6% on the year (as of March 26), slightly underperforming the Nasdaq index.
Although the pronounced selling illustrated above may give the appearance that something at Amazon could be going poorly, the actual results couldn’t be any different from such a narrative.
Last year, revenue from Amazon Web Services (AWS) increased by 18% year over year to $107 billion. This is notable for two primary reasons. First, AWS is Amazon’s most profitable category among its major reportable segments. While revenue accelerated thanks to the soaring demand for more cloud infrastructure needed for rising AI workloads, operating income for AWS rocketed by 62%. These dynamics underscore that Amazon’s investments in AI have so far contributed to a lucrative combination of rising revenue and widening profit margins.
