Billionaire David Tepper is getting in on these artificial intelligence (AI) stocks – and Nvidia isn’t one of them

By | March 29, 2024

David Tepper knows how to make money. His net worth of $20.6 billion could be Exhibit A.

The billionaire investor smartly initiated a large position Nvidia in the first quarter of 2023. By the end of the year, the chipmaker’s shares had more than tripled. Nvidia ranks fourth in Tepper’s Appaloosa Management portfolio.

Tepper has invested in several artificial intelligence (AI) stocks in the fourth quarter of 2023. However, Nvidia was not one of them. He cut Appaloosa’s position in the stock by almost 23%. Here are the three AI stocks the hedge fund manager bought the most in the fourth quarter.

1. Oracle

Oracle (NYSE: ORCL) was not in Appaloosa’s portfolio before the fourth quarter. However, Tepper initiated a new position in the stock during the quarter worth nearly $140 million by year-end. Oracle is now Appaloosa’s twelfth largest holding company.

What does Tepper like about Oracle? The tech company’s growth prospects are probably at the top of the list.

Oracle’s adjusted earnings per share rose 16% year over year in the fourth quarter, and customers continue to flock to the company’s cloud infrastructure. The struggle to harness the power of generative AI is a major reason for this.

Is Oracle an AI stock that non-billionaire investors should like? I think so.

The company’s price-to-earnings-growth (PEG) ratio is a low 1.08x. Oracle has also forged smart partnerships with Nvidia to deliver sovereign AI solutions to global customers and with Microsoft to expand the regions where the Oracle database is available on Microsoft’s Azure cloud platform.

2. Alibaba Group holding company

Tepper has increased Appaloosa’s stake in the company Alibaba Group Holding (NYSE:BABA) by almost 21% in the fourth quarter. Chinese technology stocks are the sixth largest holding in the hedge fund’s portfolio.

The billionaire probably likes Alibaba’s potential. The company is a leader in several Chinese markets, including e-commerce, cloud services, logistics and digital media. However, the valuation does not fully reflect the underlying business strength, with shares trading at just 7.8 times forward earnings.

Alibaba’s growth has slowed significantly, largely due to the sluggish Chinese economy. The company has also faced setbacks in the execution of its business strategy, with plans to spin off its cloud unit and logistics subsidiary Cainaio scrapped. Tepper could see Alibaba as a great comeback opportunity.

Aggressive investors who can wait patiently for Alibaba to turn things around can make solid gains with this stock over the long term. However, risk-averse investors should stay away from Alibaba due to the uncertainties associated with investing in Chinese stocks.

3. Amazon

Appaloosa added more than 5% to its stake in another AI stock: Amazon (NASDAQ: AMZN). The e-commerce and cloud services giant is the third largest holding in the hedge fund’s portfolio.

Tepper has been a fan of Amazon for a while. He took a position in the stock for the first time in the first quarter of 2019. Since then, Amazon’s stock price has more than doubled.

Why does the billionaire still love Amazon? Probably because the company is posting strong earnings and free cash flow growth. Tepper probably also thinks that Amazon Web Services has a big opportunity given the continued rise in interest in generative AI.

These are all good reasons for other investors to buy Amazon stock too. Don’t forget the company’s efforts to expand into new markets such as healthcare.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Keith Speights has positions at Amazon and Microsoft. The Motley Fool holds positions in and recommends Amazon, Microsoft, Nvidia and Oracle. The Motley Fool recommends Alibaba Group and recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.

Billionaire David Tepper is loading up on these artificial intelligence (AI) stocks — and Nvidia isn’t one of them was originally published by The Motley Fool

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