David Tepper knows how to make money. His net worth of $20.6 billion could be Exhibit A.
The billionaire investor shrewdly initiated a big position in Nvidia in the first quarter of 2023. By the end of the year, the chipmaker’s shares had more than tripled. Nvidia ranks as the fourth-largest position in Tepper’s Appaloosa Management portfolio.
Tepper loaded up on several artificial intelligence (AI) stocks in the fourth quarter of 2023. However, Nvidia wasn’t one of them. He slashed Appaloosa’s position in the stock by nearly 23%. Here are the three AI stocks the hedge fund manager bought the most in Q4.
1. Oracle
Oracle (NYSE: ORCL) wasn’t in Appaloosa’s portfolio before Q4. However, Tepper initiated a new position in the stock during the quarter worth nearly $140 million at year-end. Oracle is now Appaloosa’s 12th-largest holding.
What does Tepper like about Oracle? The technology company’s growth prospects probably rank at the top of the list.
Oracle’s adjusted earnings per share jumped 16% year over year in Q4, and customers continue to flock to the company’s cloud infrastructure. The scramble to harness the power of generative AI is a key reason why.
Is Oracle an AI stock that investors who aren’t billionaires should like, too? I think so.
The company’s price-to-earnings-to-growth (PEG) ratio is a low 1.08x. Oracle has also struck 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
Tepper increased Appaloosa’s stake in Alibaba Group Holding (NYSE: BABA) by nearly 21% in Q4. The Chinese tech stock ranks as the sixth-largest position 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, its valuation doesn’t fully reflect its underlying business strength, with shares trading at only 7.8 times forward earnings.
Alibaba’s growth has slowed considerably, largely due to the sluggish Chinese economy. The company has also faced setbacks in executing its business strategy, scrapping plans to spin off its cloud unit and Cainaio logistics subsidiary. Tepper could view Alibaba as a great comeback opportunity.
Aggressive investors who can wait patiently for Alibaba to turn things around could make solid long-term gains with this stock. Risk-averse investors, though, are better off staying 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 position in the hedge fund’s portfolio.
Tepper has been a fan of Amazon for a while. He first initiated a position in the stock in the first quarter of 2019. Since then, Amazon’s share price has more than doubled.
Why does the billionaire still like Amazon? Probably because the company is delivering strong earnings and free-cash-flow growth. Tepper also likely thinks that Amazon Web Services has great opportunities with the ongoing surge in interest in generative AI.
All of these are good reasons for other investors to buy Amazon stock, too. Don’t overlook the company’s efforts to expand into new markets such as healthcare, either.
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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 in Amazon and Microsoft. The Motley Fool has 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 on Microsoft and short January 2026 $405 calls on 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