Why Amazon and Visa Are Buffett-Backed Compounding Machines for the Next Decade

[text2img>A split visualization showing Amazon's AWS cloud infrastructure and Visa's global payment network, highlighting their interconnected role in modern commerce

Berkshire Hathaway's holdings in Amazon (AMZN) and Visa (V) are no accident. Both companies are textbook examples of long-term compounding machines, fueled by unassailable competitive moats, AI-driven innovation, and financial resilience. With Berkshire's Warren Buffett famously favoring businesses that generate lasting value through reinvestment and adaptability, Amazon and Visa fit the mold. Here's why they're poised to thrive for decades.

Amazon: The Cloud and E-Commerce Colossus

Competitive Moat: Amazon's dominance in e-commerce and its cloud division, AWS, creates a near-impenetrable moat. AWS holds 40% of the global cloud market, leveraging economies of scale to undercut rivals like Microsoft Azure and Google Cloud. Its ecosystem—from Prime membership to third-party sellers—creates a sticky network effect, locking in customers and businesses alike.

AI-Driven Growth:
Amazon is pouring capital into AI to maintain its edge:
- AWS's Q Business Suite: A unified AI workspace integrating tools like QuickSight (data analytics) and Q Apps (generative AI app creation). This simplifies workflows for enterprises, reducing reliance on fragmented software.
- Logistics Innovation: AI tools like Wellspring optimize delivery routes, while agentic AI robots in warehouses cut costs and improve safety.
- Global Expansion: AWS's data centers in Pennsylvania, powered by nuclear and natural gas energy, ensure scalability for AI model training.

Financial Resilience:
Amazon's operating margins improved to 11.8% in Q1 2025, signaling better cost management. With $2.19 billion in Berkshire's holdings (0.82% of its portfolio), Buffett's confidence is clear. Even at a 12% discount to Morningstar's $240 fair value estimate, Amazon remains undervalued for its growth potential.

Visa: The Global Payment Network with AI-Enhanced Security

Competitive Moat: Visa's payment network processes $12 trillion annually, benefiting from a wide moat rooted in its network effect and regulatory approvals. Its partnerships with banks and merchants create a closed-loop system where competitors struggle to replicate its reach.

AI-Driven Growth:
Visa is transforming payments with AI:
- Fraud Detection: AI analyzes 300 billion transactions yearly to block fraud, with systems like Visa Protect reducing losses by targeting high-risk transactions.
- Real-Time Payments: Visa's APIs enable instant cross-border transactions, critical as global e-commerce grows.
- Embedded Finance: Tools like Visa Payment Passkey (biometric authentication) and Visa Intelligent Commerce let AI agents securely manage payments, expanding access for fintechs and micro-sellers.

Financial Resilience:
Visa's profit margins hover near 40%, and its dividend yield of 0.8% offers stability. Berkshire owns $2.6 billion of Visa, emphasizing its role as a defensive cash cow. With $3.5 billion invested in AI infrastructure, Visa's growth is both steady and future-proof.

Why They Complement Each Other in a Portfolio

• Sector Diversification: Amazon's growth in tech/cloud contrasts with Visa's stable financial services exposure.
• AI Synergy: Visa's secure payment infrastructure underpins Amazon's global logistics, while AWS powers Visa's AI initiatives.
• Berkshire's Seal of Approval: Buffett's long-term focus aligns with both companies' reinvestment strategies—Amazon plows profits into R&D, while Visa's dividends reward patience.

Risks and Considerations

• Amazon: AWS faces competition from Microsoft and Google, while AWS's AI tools could overpromise.
• Visa: Regulatory scrutiny in payments (e.g., interchange fees) and cybersecurity threats loom.
• Market Volatility: Both stocks could falter in a recession, though their moats mitigate downside.

Investment Thesis

For long-term investors, Amazon and Visa are must-hold positions. Amazon's AI-fueled cloud dominance and e-commerce scale offer capital appreciation, while Visa's payment network and dividends provide income and stability.

• Buy Amazon if you believe in cloud computing's future and AI's role in logistics.
• Hold Visa as a hedge against market turbulence, benefiting from global commerce's digital shift.

Both are compounding machines with Berkshire's imprimatur—position yourself for the next decade now.

Final Note: These are not short-term bets. Let Buffett's wisdom guide you: Focus on moats, reinvestment, and patience. The next decade belongs to companies that own the infrastructure of tomorrow.