Image source: The Motley Fool
Widely regarded as one of the best investors of all time, it’s completely unlikely that Warren Buffett would ever need to ask an AI chatbot for help. Yet I couldn’t resist the urge to test ChatGPT and find out what tips it might offer the Oracle of Omaha.
So I posed the following question to it: “What advice would you give Warren Buffett if he asked you?”
To its credit, it provided a witty and accurate first response that went like this: “If Warren Buffett asked me for investment advice (which, let’s be honest, is about as likely as him switching from Coke to Pepsi), I’d probably flip the question around and ask him for advice instead!”
Good that it knows its limitations and recognises true intelligence. However, it did entertain my hypothetical question by providing the following points.
- Consider AI more seriously: unsurprisingly, this was top of its list. Warren Buffett has famously compared AI to nuclear weapons in the past. Recently, his Berkshire Hathaway fund sold a large stake in its main AI-focused holding, Apple. ChatGPT feels this was a mistake.
- Look beyond the US: Buffett is known for primarily focusing on US stocks while ignoring critical emerging markets like India and Southeast Asia. ChatGPT thinks these rapidly growing demographics offer exposure to diverse economic trends that could shape future markets.
- Dividend stocks: with interest rates rising, the benefits of dividends shouldn’t be ignored. The regular payments can help reduce the overall volatility in a portfolio. Buffett loves cash-generating businesses but ChatGPT feels he should also consider some high-yield dividend stocks.
- Green energy is here to stay: a true traditionalist, Buffett is a fan of fossil fuel energy stocks like Occidental Petroleum. However, ChatGPT thinks he may be wrong to ignore the rise of green energy.
AI stock picks
Based on the above criteria, the chatbot felt Buffet would be wise to consider some of the following stocks: Alphabet, LVMH, Reliance Industries, Texas Instruments, NextEra Energy and Siemens.
I then asked if it knew of any UK stock that might appeal to him if he was using the above criteria. The answer was hardly surprising — Rolls-Royce (LSE: RR.). It’s a truly international company with operations in the UK, US, Europe and Asia.
The FTSE 100 aerospace and defence giant is already developing AI-powered autonomous naval ships. It also uses the technology for predictive maintenance and simulations to optimise efficiency and reduce costs.
A key risk is the escalating uncertainty of trade in the US, with President Trump dropping new tariffs left, right and centre. As one of Rolls’ largest markets, any change there could put a strain on future profits. Not to mention the related risk of supply chain disruptions.
On the plus side, it recently restarted its dividend programme. After a four-year break, it’s kicked dividends back in at a 30% payout ratio to underlying income. Initially, this won’t equate to much more than a 1% yield but it’s a positive development nonetheless.
The company is leading the charge in developing small modular reactors (SMRs). These mini-nuclear power stations have been lauded as critical for the future of green energy. It’s also working on sustainable aviation fuel, green hydrogen and electric aircraft.
For investors who agree with the points above, it looks like a stock worth considering.
