Billionaire David Tepper of Appaloosa Management recently made headlines when his latest portfolio showed the 66-year-old owner of Carolina Panthers was piling into Chinese stocks while clearly cutting his exposure to mega-cap tech stocks which have already rewarded him heftily over the past several quarters, thanks to the AI-led rally. Tepper’s bet on Chinese stocks comes at a time when many analysts are predicting a rebound of Chinese economy as the government begins to devise more rescue plans for the devastated property sector. The MSCI China index is up about 10% since the end of March.
David Tepper’s Returns and Impeccable Stock-Picking Skills
David Tepper, who founded Appaloosa Management back in 1993, returned 20% last year, thanks to his huge stake in AI stocks. A cursory analysis of David Tepper, worth over $20 billion, shows that he was piling into AI stocks when they were just getting started. This wasn’t a fluke or a one-off success from the billionaire. Data from Bloomberg shows that Tepper has posted annualized returns of 28% for investors, before fees. In 2022, when markets were tumbling amid inflation storm and rising interest rates, Appaloosa returned 12.5%. Tepper’s instincts and grip over financial markets were strong even when he was in his late 20s and 30s, raking in huge profits for Goldman Sachs, which he’d joined in 1985.
Tepper rose to fame at Goldman when his portfolio stood out in the mist of the market crash of 1987. According to The Alpha Masters: Unlocking the Genius of the World’s Top Hedge Funds, written by Maneet Ahuja, Tepper recalled:
“Going into the crash I had set up my entire portfolio as just short—I had no long positions. I made a fortune during and after the crash,” he says with a chuckle. “It was very cool.” Unfortunately, the rest of the firm didn’t do as well. “I still got a raise but not as much as I should have.”
Methodology
For this article we scanned David Tepper’s Appaloosa Management’s Q1’2024 portfolio and chose his top 10 AI stock picks. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
10. Qualcomm Inc (NASDAQ:QCOM)
Billionaire David Tepper Q1’2024 Stake Value: $167,607,000
Billionaire David Tepper owns a $167 million stake in Qualcomm as of the end of the first quarter of 2024.
In its third quarter 2023 investor letter, Bonsai Partners stated the following regarding QUALCOMM Incorporated (NASDAQ:QCOM):
“Robustness at the product level exists differently than in other layers of the value chain. Product diversification follows the same principle, but product control isn’t related to vertical integration. Product control exists in multiple forms, such as switching costs or happy customers who don’t want to buy elsewhere. However, one often overlooked dimension of product-level robustness is adaptability. Some businesses offer goods and services that behave like shapeshifters; they naturally adapt to the market’s needs regardless of how the world changes. Adaptability also serves as a hedge against the unknown.
Consider our investment in Taiwan Semiconductor, which enjoys a highly adaptive product portfolio. If we compare TSMC to a fabless chip maker like QUALCOMM Incorporated (NASDAQ:QCOM), investing in Qualcomm is a bet that its products will retain their technological advantage over time. Meanwhile, TSMC sells a service that naturally produces whatever the end customer wants. There is little need for brilliant product-level foresight; TSMC just needs to maintain its process and service level advantages, allowing it to manufacture whatever the market demands. TSMC’s product portfolio is robust compared to most other semiconductor companies because it naturally adapts to technological and market-driven shifts. Instead of product-level risk, TSMC’s core risks are geopolitical.
In the past, I would have been more drawn to a company like Qualcomm given its clear technological lead in baseband modems, but if I’m honest with myself, I don’t know if their technologies will retain their dominance ten years from now. Qualcomm’s products express a relatively high degree of rigidity in a fast-changing industry, and this is something I prefer to avoid.
While robustness isn’t a guarantee of company survival, it acts as a natural buffer that insulates the companies we invest in against the unknown. The better we are at identifying robustness for our portfolio, the longer we also will endure.”
9. Adobe Inc. (NASDAQ:ADBE)
Billionaire David Tepper Q1’2024 Stake Value: $176,610,000
Billionaire David Tepper’s Appaloosa Management opened a new position in Adobe Inc. (NASDAQ:ADBE) during the first quarter of 2024, buying 350,000 shares of Adobe Inc. (NASDAQ:ADBE), worth $177 million. Adobe accounts for about 2.6% of Appaloosa’s total portfolio. Adobe Inc. (NASDAQ:ADBE) is continuing to integrate several AI-related features into its products. It recently launched a preview showing the integration of OpenAI, Pika Labs and Runway into its Premier Pro video editing software. Over the past one year Adobe Inc. (NASDAQ:ADBE) shares have gained about 21%.
UBS last month published a list of its highest-conviction AI stock picks for the next 6 to 24 months. Adobe Inc. (NASDAQ:ADBE) was part of the list.
Ithaka US Growth Strategy stated the following regarding Adobe Inc. (NASDAQ:ADBE) in its first quarter 2024 investor letter:
“Founded in 1982, Adobe Inc. (NASDAQ:ADBE) is one of the largest and most diversified software companies in the world. It offers products and services used by creative professionals and consumers to create and deliver compelling content and experiences across various platforms. Adobe’s stock price underperformance was concentrated around its earnings announcement, during which the management team posted a smaller than expected beat (5% beat vs. 11% average) in Net-New Annualized Recurring Revenue for the Digital Media segment. On top of the smaller beat management provided unexpectedly soft forward guidance that resulted in multiple compression.”
8. Oracle Corp (NYSE:ORCL)
Billionaire David Tepper Q1’2024 Stake Value: $288,903,000
Being one of the biggest software and database companies, Oracle Corp (NYSE:ORCL) is in a strong position to leverage AI to its advantage. Earlier this, UBS published a list of stocks that it believes are positioned well to benefit from AI where revenue over the next three years is expected to cross $400 billion. Oracle Corp (NYSE:ORCL) was part of this list. UBS believes AI infrastructure revenue could reach $195 billion in 2027 from $25.8 billion in 2022.
Billionaire David Tepper increased his stake in Oracle Corp (NYSE:ORCL) by 74% in the first quarter of 2024, ending the period with a $289 million stake in Oracle Corp (NYSE:ORCL). Oracle Corp (NYSE:ORCL) shares have gained about 17% over the past one year.
Madison Sustainable Equity Fund stated the following regarding Oracle Corporation (NYSE:ORCL) in its fourth quarter 2023 investor letter:
“Oracle Corporation (NYSE:ORCL) reported a disappointing second quarter due to supply constraints. Cloud revenue was below expectations as Oracle made planning decisions to accommodate some large-scale Oracle Cloud Infrastructure (OCI) clients that take longer to bring online. We continue to believe that Oracle has a unique position in Generative AI workloads and continue to like its position and strategy.”
7. Advanced Micro Devices Inc (NASDAQ:AMD)
Billionaire David Tepper Q1’2024 Stake Value: $294,198,700
Advanced Micro Devices Inc (NASDAQ:AMD) is gaining ground as investors and analysts question Nvidia’s valuation and look for undervalued players. Advanced Micro Devices Inc (NASDAQ:AMD) is also giving clarity about its AI plans. Wolfe Research recently replaced Nvidia with Advanced Micro Devices Inc (NASDAQ:AMD), saying while it has not changed its thesis on both stocks, NVDIA’s strong YTD run has caused it to shift priorities.
Billionaire David Tepper cut his stake in Advanced Micro Devices Inc (NASDAQ:AMD) by 19% in the first quarter of 2024, ending the quarter with a $294 million stake.
As of the end of the first quarter of 2024, 124 hedge funds tracked by Insider Monkey reported owning stakes in Advanced Micro Devices Inc (NASDAQ:AMD). The biggest stakeholder in Advanced Micro Devices Inc (NASDAQ:AMD) during this period was Ken Fisher’s Fisher Asset Management which owns a $5.2 billion stake.
Meridian Contrarian Fund stated the following regarding Advanced Micro Devices, Inc. (NASDAQ:AMD) in its fourth quarter 2023 investor letter:
“Advanced Micro Devices, Inc. (NASDAQ:AMD) is a global semiconductor chip maker specializing in central processing units (CPUs), which are considered the core component of most computing devices, and graphics processing units (GPUs), which accelerate operations running on CPUs. We invested in 2018 when it was a mid-cap value stock plagued by many years of underperformance due to lagging technology and lost market hi share versus competitors Intel and Nvidia. Our research identified that changes and investments made by current management under CEO Lisa Su had, over several years, finally resulted in compelling technology that positioned AMD as a stronger competitor to Nvidia and that its latest products were superior to Intel’s. We invested on the the belief that AMD’s valuation at that that time did not reflect the potential for its technology leadership to generate significant market share gains and improved profits. This thesis has been playing out for several years. During the quarter, AMD unveiled more details about its upcoming GPU products for the AI market. The stock reacted positively to expectations that AMD’s GPU servers will be a viable alternative to Nvidia. Although we pared back our exposure to AMD into strength as part of our risk-management practice, we maintained a position in the stock. We believe AMD will continue to gain share in large and growing markets and is reasonably valued relative to the potential for significantly higher earnings.”
6. Alphabet Inc. (NASDAQ:GOOG)
Billionaire David Tepper Q1’2024 Stake Value: $315,939,500
David Tepper first bought a stake in Alphabet Inc. (NASDAQ:GOOG) in the third quarter of 2024, gradually adding to his position over the years. However, the billionaire started decreasing his hold in Alphabet Inc. (NASDAQ:GOOG) significantly in 2021. In the first quarter, Appaloosa decreased its position in Alphabet Inc. (NASDAQ:GOOG) by 10%. The fund still owns a $316 million stake in Alphabet Inc. (NASDAQ:GOOG).
Bloomberg recently reported Alphabet Inc. (NASDAQ:GOOG) and Meta Platforms are in talks with major Hollywood studios to license content for use in AI video generation software.
Alphabet Inc. (NASDAQ:GOOG) is also one of the most popular AI stocks among the over 900 hedge funds tracked by Insider Monkey. As of the end of the first quarter of 2024, Insider Monkey’s proprietary database of hedge funds shows that 222 hedge funds reported owning stakes in the search engine giant, up from 214 funds in the previous quarter.
Bronte Capital Amalthea Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its first quarter 2024 investor letter:
“Our biggest position is Alphabet Inc. (NASDAQ:GOOG), the holding company for Google. It is currently about 12 percent of funds under management. This has been a large position for over ten years.
We bought a large position in Google in October 20104, and the stock immediately dropped 11 percent.
That was an astonishingly good purchase and if we had held it all from October 2010 until the end of this month the gain would have been about 1300 percent.
Alas we did not hold it all. We have trimmed it many times – and it is now merely a large position. (We have lived to regret every single trim…)..” (Click here to read the full text)
5. Nvidia Corp (NASDAQ:NVDA)
Billionaire David Tepper Q1’2024 Stake Value: $399,373,520
David Tepper piled into Nvidia Corp (NASDAQ:NVDA) when it was just getting started. The billionaire bought 150,000 shares of Nvidia Corp (NASDAQ:NVDA) in the first quarter of 2023 at $216.41 per share. In the very next quarter the billionaire increased his stake in Nvidia Corp (NASDAQ:NVDA) to a whopping one million shares and kept the stake steady through the third quarter of 2023. However, Tepper decreased his stake in Nvidia Corp (NASDAQ:NVDA) in the fourth quarter of 2023 and the first quarter of 2024, ending the March quarter of this year with 442k shares of Nvidia Corp (NASDAQ:NVDA).
Appaloosa might be cutting its stake in Nvidia Corp (NASDAQ:NVDA) but other hedge funds are continuing to pile into the stock. Insider Monkey’s proprietary database of 919 hedge funds updated for the first quarter of 2024 shows that 186 hedge funds had stakes in Nvidia Corp (NASDAQ:NVDA) as of the end of the March quarter, up from 173 hedge funds in the previous quarter.
Aristotle Atlantic Focus Growth Strategy stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its first quarter 2024 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) contributed to portfolio performance in the first quarter, as the company continues to see accelerating demand for its GPU semiconductors from hyperscalers and enterprises. Nvidia’s GPU semiconductors continue to be the industry-leading building blocks of the accelerated computing data-center architecture to drive AI compute and applications.”
