David Tepper has heavily invested in artificial intelligence (AI) compared to other hedge fund managers. AI stocks have been a significant part of his fund’s portfolio for an extended period of time.
Nevertheless, the billionaire investor seems to have lost interest in AI lately. Tepper significantly reduced his investments in various AI companies in the second quarter of 2024.
Tepper’s top five AI reductions in the second quarter
In the second quarter, Tepper decreased the investments in the top five holdings of Appaloosa, all of which have a significant emphasis on artificial intelligence.
He disposed of 750,000 shares. Alibaba Group Holding is the name of the company. ( BABA 0.09% ) Appaloosa reduced its ownership in the Chinese internet company by approximately 6.7%. Despite this, Alibaba continues to be the primary investment in the hedge fund, representing about 12.2% of its total portfolio.
Tepper reduced Appaloosa’s investment. Amazon ( AMZN 4.40% ) He reduced his stake in the e-commerce and cloud services company by 9.2% by selling 353,000 shares. However, this did not affect Amazon’s position as the hedge fund’s second-largest holding.
The wealthy investor divested over 15.6% of his holdings. Microsoft ( MSFT 1.18% ) Even with this notable decrease, the technology company remains the third-largest position in Appaloosa’s portfolio.
Although Meta Platforms ( META 2.01% ) Despite maintaining its position as the fourth largest holding in Appaloosa’s portfolio, the hedge fund has significantly reduced its ownership of the social media and metaverse company. Tepper sold over 15.6% of Appaloosa’s shares in Meta during the second quarter.
He additionally disposed of 150,000 shares of. Alphabet ( GOOG 0.70% ) ( GOOGL 0.58% ) Appaloosa decreased its investment in Alphabet, Google’s parent company, by over 7.2%. Despite this, the selling of shares did not result in Alphabet losing its position as the fifth-largest holding in the hedge fund’s portfolio.
What is the reason behind Tepper’s decision to sell these AI stocks?
Tepper has not publicly revealed the reasons behind his choice to decrease the holdings of Appaloosa in its top AI stocks. All we can do is make assumptions about his rationale.
It is noteworthy that the hedge fund manager diversified his selling across various AI stocks instead of focusing on just one or two. Tepper decreased Appaloosa’s investments in companies such as Alibaba, Amazon, Microsoft, Meta, Alphabet, and also in a number of other AI stocks.
However, he did not completely give up on AI stocks. For instance, Tepper decided to increase his hedge fund’s investments in them. Adobe and ASML Holdings .
Maybe he was worried about high prices in certain situations. Nevertheless, this doesn’t apply universally. For instance, Alibaba has a low forward price-to-earnings ratio of 9.4. Alphabet and Meta stocks do not seem excessively costly considering their valuations. multiples of the price-to-earnings-to-growth ratio (PEG) Furthermore, certain stocks that Tepper purchased in the second quarter have greater valuations compared to those he offloaded.
One possible reason for Tepper reducing his investments in the majority of these five AI stocks could be that he aimed to secure some profits. Apart from Alibaba, all the other leading AI stocks in Appaloosa’s portfolio had shown significant gains so far in the second quarter.
Are you considering selling them as well?
Each investor has their own goals to take into account when purchasing and selling stocks. It is important to note that just because a well-known investor such as Tepper is selling off his largest AI stock positions, it does not necessarily mean that you should do the same without careful consideration.
Alibaba is expected to have promising future opportunities by providing AI cloud services in China. Similarly, Amazon, Alphabet, and Microsoft are also set to experience growth in the U.S., Europe, and other important markets due to the same trend.
Meta is leveraging artificial intelligence to enhance the profitability of its social media applications and has a significant potential in the corporate artificial intelligence sector. I believe that the five leading artificial intelligence stocks that Tepper divested in the second quarter could be appealing investment options for numerous long-term investors.
