Had You Bought This Artificial Intelligence (AI) Stock When Warren Buffett Sold It, You'd be Sitting on a 47% Return Now

Core Insights - Warren Buffett will step down as CEO of Berkshire Hathaway at the end of 2025, marking a significant transition for the company after delivering consistent returns for shareholders since 1965 [1] Company Overview - Berkshire Hathaway's investment strategy typically focuses on companies with steady growth, reliable earnings, and strong management teams that prioritize shareholder-friendly policies [2] - The company made a surprising investment in Snowflake ahead of its IPO in 2020, which did not align with Buffett's usual investment criteria [2][3] Investment Decisions - Berkshire Hathaway sold its entire position in Snowflake in Q2 2024, realizing minimal gains on the investment, despite Snowflake's stock rising 47% since the sale [3][16] - The decision to exit the investment was deemed appropriate given Snowflake's valuation and ongoing losses [19][20] Snowflake's Business Model - Snowflake's primary product is its data cloud, which integrates data from various cloud platforms, enabling detailed analyses and insights [5] - The company launched Cortex AI in late 2023, providing access to large language models for businesses to create AI software [6] AI Product Adoption - As of the end of Q1 fiscal 2026, Snowflake had 11,578 customers, with approximately 5,200 using its AI products weekly, indicating rapid adoption of its new offerings [9] Financial Performance - Snowflake's product revenue grew 26% year-over-year in Q1 fiscal 2026, reaching $996.8 million, marking the slowest growth rate since its IPO [10] - The company reported a net loss of $430.1 million in Q1, a 35% increase from the previous year, while operating costs also rose by 26% [12] Future Outlook - Snowflake forecasts a further slowdown in revenue growth to 25% for Q2 fiscal 2026, raising concerns about its financial trajectory [13] - Remaining performance obligations (RPOs) grew 34% year-over-year to $6.6 billion but decreased from the previous quarter, indicating potential future revenue weakness [14] Valuation Concerns - Snowflake's stock is considered expensive, trading at a price-to-sales ratio of 17.3, significantly higher than competitors like Amazon and Microsoft [16] - Despite some positive growth indicators, the company's ongoing losses and high valuation would typically exclude it from Berkshire's investment criteria [18][19]