Billionaire investor David Tepper has 46% of his portfolio invested in 5 hot artificial intelligence (AI) growth stocks — but he made some big changes this quarter

David Tepper has developed a large following on Wall Street. The billionaire heads Appaloosa Management – ​​the hedge fund he founded in 1993. He has been called “the greatest hedge fund manager of his generation” by the billionaire. Forbes magazine and has “consistently outperformed peers in the industry and broader global markets since Appaloosa’s inception,” according to Carnegie Mellon University.

The results speak for themselves. Over the past three years, Appaloosa has outperformed Standard & Poor’s 500 By nearly 17%, a remarkable achievement considering the macroeconomic downturn that has plagued investors during 2022. Given its strong results, Tepper’s stock picks may be worth additional review.

Appaloosa’s portfolio is significantly overweight Artificial Intelligence (AI) Stocks, with just five companies representing more than 46% of the fund’s holdings to close the fourth quarter:

  • Meta platforms (NASDAQ:META): 11.6%

  • Microsoft (NASDAQ:MSFT): 11.3%

  • Amazon (Nasdaq: AMZN): 10.6%

  • Nvidia (Nasdaq: NVDA): 6.9%

  • the alphabet (Nasdaq:Google) (NASDAQ:GOG): 5.7%

Keep in mind that hedge funds only report their holdings at the end of each quarter, and during these five stocks sum Largely unchanged compared to Q3, there has been a significant change in holdings.

Close-up of a person reviewing charts across multiple large computer screens.

Image source: Getty Images.

1. Meta platforms

Meta Platforms remains Tepper’s largest holding, largely unchanged since the previous quarter. The company’s history of using artificial intelligence to display relevant content to users on its social media sites is well documented. Furthermore, as the world’s second-largest digital advertising platform, Meta generates the lion’s share of its revenue from targeted advertising – which is most effective when powered by AI.

The company is not like that Resting on his laurels, recently launched a suite of AI-powered tools for advertisers, designed to help better reach desired audiences. Furthermore, LLaMA AI (Large Language Model Meta AI) has become one of the leading open source AI models and can be found on every major cloud infrastructure platform – for a price.

Meta is up 172% last year, so even with Tepper cutting his share count by 5%, the stock – as percent His wallet – almost unchanged.

2. Microsoft

Recognizing the tremendous opportunity ahead, Microsoft has moved quickly to integrate generative AI capabilities into its widely used workplace productivity tools and cloud infrastructure platform.

Microsoft’s AI assistant, Copilot, is the standard bearer for these innovations. Users are quick to adopt Copilot thanks to its ability to increase user productivity. Several analysts have suggested that Copilot could generate $100 billion in additional revenue by 2027. Perhaps just as important, Copilot has a halo effect on Microsoft Azure, which outperformed its rivals in cloud infrastructure in the fourth quarter. Furthermore, management attributed 6 percentage points of this growth to growing demand for artificial intelligence.

Tepper is likely impressed by the company’s strong move into AI and market share gains in the cloud. This gave him an incentive to increase his number of Microsoft shares by 4%, to 11.3% of his portfolio. It probably doesn’t hurt that it’s only selling at a slight premium to the overall market – a bargain for potential growth of this size.

3. Amazon

Amazon has a trio of successful businesses, including industry-leading e-commerce operations and cloud infrastructure, as well as the company’s No. 3 digital advertising platform. Amazon has long been at the forefront of AI development, using these cutting-edge algorithms to improve its operations, from making product recommendations to scheduling the most efficient delivery routes.

Most recently, the company introduced Amazon Rufus, a digital shopping assistant designed to answer product questions, make comparisons, and make recommendations based on specific criteria. Furthermore, Amazon Web Services (AWS) customers have access to cutting-edge generative AI models, which could reignite the company’s cloud growth.

Tepper clearly sees additional upside, as he increased his Appaloosa holdings by 5%, bringing Amazon to 10.6% of its total portfolio. With only double next year’s sales, Amazon stock is a steal.

4. Nvidia

Nvidia is arguably the poster child of the AI ​​revolution, as its graphics processing units (GPUs) are the gold standard not just for gaming, but also for data centers, accelerating information over the air. Its unparalleled computing power has given the company a near monopoly on GPUs for both machine learning and data center use cases, with 95% of its own markets. This superiority gave the company a leading position in the generative artificial intelligence market, which it dominated from the beginning.

However, Tepper reduced its stake in Nvidia by 23%, bringing it down to 6.9% of Appaloosa’s holdings, from 8.8% in the third quarter. However, Nvidia stock jumped 239% last year, so Tepper is likely taking advantage of the opportunity to take some profits.

5. Alphabet

Alphabet’s Google Search acts as a funnel to support the company’s industry-leading digital advertising business, which is also powered by artificial intelligence. The company has been quick out of the gate to develop generative AI functionality, infusing AI across a broad swath of Android and Google products. Like Amazon and Microsoft, Google is one of the “Big Three” cloud providers, giving it the ideal channel to sell AI products to its cloud customers.

Recent developments include the debut of Gemini AI, which the company calls its “largest, most capable AI model.” Vertex AI from Google Cloud continues to expand, providing access to 130 core AI models, with something to fit every need.

However, for all its potential, Appaloosa sold nearly 16% of its holdings in Alphabet last quarter, bringing its stake to 5.7%, down from 7.2%. While Tepper did not address the move, he likely saw greater potential opportunities for Microsoft and Amazon.

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Susan Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Danny Vina He holds positions at Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has Disclosure policy.

Billionaire investor David Tepper has 46% of his portfolio invested in 5 hot artificial intelligence (AI) growth stocks — but he made some big changes this quarter Originally published by The Motley Fool

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