Appaloosa’s billionaire chief appears to be shifting his focus within the artificial intelligence (AI) arena.
More than 30 years ago, the advent and proliferation of the internet represented a leap forward in growth potential for corporate America. Although it took years for businesses to turn this innovation into a powerful moneymaking tool, investors have been waiting a long time for the next game-changing trend to come along that can positively impact the corporate growth rate. The evolution of artificial intelligence (AI) looks to be this next leap forward.
Businesses are freely spending on the hardware and solutions necessary to gain a competitive edge within their respective industries. Based on estimates from PwC, global gross domestic product is expected to jump by 26% come 2030 solely because of AI.
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But what’s even more interesting than speculating about where AI can take us is analyzing how Wall Street’s smartest money managers have approached their trading activity in leading AI stocks.
No later than 45 calendar days following the end to a quarter, institutional investors with at least $100 million in assets under management (AUM) are required to file Form 13F with the Securities and Exchange Commission. A 13F offers a way for investors to track which stocks, exchange-traded funds (ETFs), and select options Wall Street’s most-successful asset managers bought and sold in the latest quarter.
Though most investors track Warren Buffett’s trading activity like a hawk, he’s not the only billionaire fund manager with an impressive track record. David Tepper of Appaloosa, who’s currently overseeing north of $8 billion in AUM, is another billionaire investors wisely pay close attention to.
Tepper is a big fan of the rise of AI, but he’s been quite picky about the artificial intelligence stocks he’s buying and selling. Over the last two years, Tepper has shown two of the biggest players in the AI-graphics processing unit (GPU) space to the door, all while recently diving into one of the newest members of the trillion-dollar club on Wall Street.
Appaloosa’s billionaire chief sends shares of Nvidia and AMD packing
Despite abundant spending on data-center infrastructure and the AI-GPUs needed to facilitate split-second decisions and the training of large language models, Appaloosa’s 13Fs have shown Tepper to be a persistent seller of shares of Nvidia (NVDA 0.33%) and Advanced Micro Devices (AMD 1.17%), which is best known as “AMD.”
Taking into account Nvidia’s largest-ever forward split (10-for-1) in June 2024, Appaloosa’s stake in Nvidia has shrunk from 10.2 million split-adjusted shares, as of June 30, 2023, to just 300,000 shares by March 31, 2025 — a decline of 97%! Meanwhile, Tepper’s position in AMD was whittled down from a peak of 2.31 million shares in the June-ended quarter in 2023 to no shares remaining, as of March 31, 2025.
While demand for AI-GPUs has been robust, there are a couple of reasons that may help explain why Appaloosa’s billionaire investor headed for the exit.
The most obvious of these reasons is that Tepper might have been locking in gains. Shares of Nvidia and AMD both soared amid the hype of the AI revolution, and the average holding in Tepper’s fund has stuck around for less than 10 quarters (30 months). Cashing in his chips following a historic run-up for both companies would make sense.
The concern is there may be more to this selling activity than Tepper’s desire to lock in gains.
For example, there are regulatory issues at play that make Nvidia and AMD somewhat risky investments. Both the Joe Biden and Donald Trump administrations restricted exports of advanced AI chips and related equipment to China, which is the world’s No. 2 economy. These export restrictions, coupled with President Trump’s global tariff policy, threaten to reduce sales and/or margins for AI hardware providers.
Increasing competition is another potential worry for Nvidia and Advanced Micro Devices. As long as AI-GPU scarcity persists, both companies can charge a premium for their hardware. But with external and internal competition picking up, this scarcity should wane over time and whittle away their pricing power.
Lastly, there’s the potential for an AI bubble forming and bursting. There hasn’t been a game-changing innovation in decades that’s avoided a bubble early in its expansion phase. The fact that most businesses haven’t yet optimized their Ai solutions and aren’t generating a positive return on their AI investments suggests AI is a long way from being a mature technology. If history were to repeat and the AI bubble bursts, hardware providers like Nvidia and AMD would, presumably, be hit hard.
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David Tepper appears to be shifting his focus amid the AI revolution
Though billionaire David Tepper hasn’t been shy about reducing his fund’s exposure to key AI-GPU providers in recent quarters, there is one premier artificial intelligence stock he’s buying. Specifically, Appaloosa’s head investor opened a 130,000-share position in AI-networking specialist Broadcom (AVGO 1.51%) during the first quarter.
Only 11 publicly traded companies worldwide have ever achieved a $1 trillion valuation, 10 of which trade on U.S. exchanges. Broadcom is one of the more recent of these elite businesses to hit this psychologically important threshold.
Broadcom stock really began to pick up steam two years ago, following its introduction of the Jericho3-AI fabric. Broadcom’s integral role in the AI arena is to connect large numbers of GPUs to maximize their compute capabilities and minimize tail latency. In other words, Broadcom’s solutions are designed to expedite the split-second decision-making required of AI-driven software and systems.
The bulk of Broadcom’s growth and net sales are currently derived from the rise of AI and its advanced chips. In fiscal 2024, which ended on Nov. 3, 2024, it delivered $51.6 billion in sales, with approximately $12.2 billion coming from AI-related revenue. By fiscal 2027, CEO Hock Tan sees AI-related sales jumping to between $60 billion and $90 billion due to spending growth from a small number of hyperscale customers.
But what might make Broadcom so attractive to Tepper is its diversified operations. Make no mistake about it, AI is the fuel that’s accelerated Broadcom’s sales and profit growth. However, it’s also one of the leading providers of wireless chips and accessories used in next-generation smartphones. Wireless providers expanding the reach of their 5G networks has led to a consistent smartphone replacement cycle and healthy demand for Broadcom’s solutions.
In addition to being a key player in wireless chips for smartphones, it also provides an assortment of solutions to the industrial sector and is the parent of cybersecurity solutions provider Symantec.
Furthermore, Broadcom has leaned on acquisitions as a means to expand its product and service ecosystem. For instance, its mammoth $69 billion buyout of cloud and virtualization software company VMware in November 2023 better positioned it to become a major infrastructure technology player for businesses managing applications across private and hybrid clouds.
If the AI bubble were to burst, Broadcom would be expected to navigate a challenging environment for tech stocks far better than Nvidia or AMD.
