David Tepper's Carolina Panthers didn't make the NFL playoffs this year. However, Tepper has other things to make him feel better.
For example, his net worth currently stands at a whopping $20.6 billion. He's also viewed by many as the greatest hedge fund manager of the last four decades.
Tech stocks have been key to Tepper's success in the past, and that isn't likely to change going forward. The multibillionaire currently has nearly 58% of his Appaloosa Management hedge fund invested in just seven artificial intelligence (AI) stocks.
Tepper's favorite AI stocks
Below are the top seven AI stocks in Tepper's Appaloosa portfolio, as of the hedge fund's latest 13F-HR filing on Nov. 14, 2023:
| Stock | Shares Owned | Percent of Portfolio |
|---|---|---|
| Meta Platforms (META 0.43%) | 1.95 million | 11.56% |
| Microsoft (MSFT 1.82%) | 1.64 million | 10.19% |
| Amazon (AMZN 3.43%) | 3.75 million | 9.41% |
| Nvidia (NVDA 6.18%) | 1.02 million | 8.80% |
| Alphabet (GOOG 9.96%) (GOOGL 10.22%) | 2.75 million | 7.16% |
| Alibaba Group Holding (BABA 0.59%) | 3.6 million | 6.16% |
| Advanced Micro Devices (AMD 2.37%) | 2.27 million | 4.62% |
| Total | 57.9% | |
Data source: Appaloosa 13F-HR filing.
Five of the so-called "Magnificent Seven" stocks -- Meta, Microsoft, Amazon, Nvidia, and Alphabet -- rank as Tepper's largest holdings. The only members of the group that he doesn't own are Apple and Tesla.
Why these seven AI stocks?
We know one thing for sure: Tepper didn't buy these stocks just because of the recent generative AI buzz. For example, he's owned Meta stock since 2014 (back when it was still known as Facebook). His Appaloosa hedge fund initiated a position in Alphabet the following year.
Perhaps the simplest reason why Tepper is invested so heavily in these seven stocks is that he likes their growth prospects. AI certainly plays a key role in the future growth for all of the companies.
Meta is charting a different course than the others by open sourcing much of its AI efforts. CEO Mark Zuckerberg believes that this approach will pay off over the long run. He noted in the company's third-quarter earnings conference call that open sourcing "increases adoption and creates a standard around the industry." Zuckerberg thinks that Meta ultimately will benefit from this.
Microsoft, Amazon, Alphabet, and Alibaba all operate cloud platforms. They will experience significant growth as companies shift their IT spending to the cloud, in large part to build AI apps.
Nvidia and Advanced Micro Devices (AMD) are the AI equivalents of the picks-and-shovels merchants during the gold rush days. Nvidia's graphics processing units (GPUs) are currently the gold standard for powering AI apps, and AMD is fighting for market share in the AI chip space, as well. Meta and Microsoft announced in December that they plan to use AMD's newest AI chips, signaling that there's a big opportunity for alternatives to Nvidia.
Are Tepper's top AI stocks good picks for other investors?
Wall Street is only enthusiastic about one of Tepper's top AI stocks over the next 12 months: The average price target for Alibaba reflects an upside potential of more than 60%. Analysts don't expect much from the other stocks -- at least over the near term.
I think, though, that all seven of these AI stocks could be big winners for long-term investors. Alibaba is the most attractively valued of the group. However, it also could be more volatile due to the sluggish growth of the Chinese economy.
AI won't be the only growth driver for these stocks. Meta and Alphabet could enjoy solid growth in advertising revenue from their online platforms. Microsoft is a huge player in multiple markets, including productivity software and gaming.
Amazon and Alibaba are e-commerce giants. Nvidia and AMD market their chips for purposes not related to AI.
I predict, however, that AI will be the biggest tailwind for all of these stocks and help increase Tepper's net worth to a lot more than $20.6 billion within a few years. I suspect that investors who aren't multibillionaires could make plenty of money with Meta, Microsoft, Amazon, Nvidia, Alphabet, Alibaba, and AMD, too.
