Billionaire David Tepper Is Selling Amazon and Meta Stocks but Betting on Artificial Intelligence (AI) in a Different Way
Billionaire David Tepper has decided to sell off his shares in Amazon and Meta. However, he is still bullish on artificial intelligence (AI) and is exploring different avenues to invest in the technology. Tepper's move reflects a shifting focus in his investment strategy towards AI-related opportunities. The billionaire's decision is closely watched by investors looking for insights into the market trends.
David Tepper didn't amass a net worth of $21.3 billion by thinking conventionally. He's viewed by some as the greatest hedge fund manager of this generation as a result of his out-of-the-box moves. If you look at the top holdings in Tepper's Appaloosa Management portfolio, you'll probably quickly see that the billionaire seems to like artificial intelligence (AI) stocks. But he appears to be betting on AI in a different way than most these days.
Tepper's Approach to AI Stocks
AI stocks Tepper is selling and buying include Amazon and Meta Platforms. Amazon has been an AI leader for years with its Amazon Web Services (AWS) ranking as the leading cloud services provider. Meta Platforms, on the other hand, extensively incorporates AI throughout its Facebook, Instagram, Messenger, and WhatsApp applications. Despite their presence in Tepper's top 10 holdings, he reduced Appaloosa's positions in both companies in the fourth quarter of 2024.
However, Tepper increased Appaloosa's stake in Alibaba Group Holding by 18.4% and bought more shares of JD.com, raising his hedge fund's position in the company by nearly 43.4%. Both Alibaba and JD.com are Chinese companies heavily investing in AI, which Tepper finds more attractive than their U.S. counterparts.
Tepper's Most Interesting AI Angle
Tepper's most interesting AI angle involves investments in Vistra and NRG Energy. In the fourth quarter, he significantly increased his positions in both companies. Vistra is the leading integrated power provider in the U.S., while NRG Energy is one of the largest energy retailers in the country, catering to residential and business customers.
Both Vistra and NRG Energy are related to AI through data centers supporting AI, which are key growth drivers for these companies. Vistra highlighted that U.S. energy demand for data centers is projected to nearly quadruple by 2030. NRG Energy is also focusing on unlocking opportunities related to data centers, particularly in Texas, the fastest-growing power market in the country.
Considerations for Investors
Tepper's purchases of Vistra and NRG Energy suggest a bet on the future of AI indirectly through these companies. While it's not advisable to invest solely based on a billionaire hedge fund manager's moves, Vistra and NRG Energy present attractive valuations and growth prospects. Both companies have seen significant declines in their stock prices this year, making them potentially interesting investment opportunities.
Vistra's forward price-to-earnings ratio is 16.3, while NRG Energy trades at 12.8 times forward earnings. Given the increasing demand for power, especially from data centers, these companies could be well-positioned for future growth. While they may not be classified as pure AI stocks, Tepper's strategy of exploring ancillary ways to profit from the AI boom seems compelling.