David Tepper amassed a fortune of $20.6 billion by making plenty of smart decisions. Some investors will probably question one of his recent decisions, though. In the fourth quarter of 2023, Tepper sold nearly 23% of his Appaloosa Management hedge fund's position in Nvidia (NVDA 6.18%).
In retrospect, that doesn't appear to be a great move. Nvidia's shares have skyrocketed more than 70% so far in 2024. However, Tepper remains heavily invested in the GPU maker. Nvidia is still Appaloosa's fourth-largest holding. He's also still very bullish on artificial intelligence (AI). Here are four AI stocks the billionaire investor bought in Q4.
1. Oracle
Oracle (ORCL 2.02%) ranks as Tepper's biggest new position in Q4. He bought 1.32 million shares of the database and software giant that were worth close to $140 million at the end of 2023.
Since then, Oracle's shares have risen by a single-digit percentage. The company hasn't had any major news to provide a catalyst yet in 2024. That could soon change: Oracle is scheduled to announce its fiscal 2024 third-quarter results on March 11.
In the meantime, Oracle has been busy bolstering its AI credentials. The company launched its new Oracle cloud infrastructure generative AI service in January. This new service enables Oracle's cloud platform customers to build generative AI apps using large language models from Cohere and Meta Platforms. Oracle is also a major partner with Nvidia's DGX Cloud AI supercomputing service.
2. Alibaba
Tepper also loaded up on Alibaba (BABA 0.59%) in Q4. His hedge fund already owned a sizable position in the Chinese tech stock but added another 750,000 shares. That was enough to boost Appaloosa's stake in Alibaba by nearly 21%.
It's not hard to see why Tepper might like Alibaba right now. The stock is down more than 20% over the last 12 months due in large part to sluggish growth in China. This decline, though, has made Alibaba cheaper than it's been in quite a while with a forward earnings multiple of only 8.1 times.
Alibaba has reportedly placed big orders for Nvidia's chips to use with its cloud platform. However, it can't deploy the most advanced GPUs because of U.S. restrictions on exports of AI technology to China.
3. Amazon
Amazon (AMZN 3.43%) retained its No. 3 spot in Appaloosa Management's portfolio at the end of 2023. But it was a bigger position for the hedge fund after Tepper increased his stake in the e-commerce and cloud services giant by more than 5.3%. That has turned out to be a great move, with Amazon stock jumping by a double-digit percentage so far in 2024.
Why does Tepper like Amazon? I suspect two reasons especially stand out. First, the company's profitability and free cash flow are growing robustly. Second, the Amazon Web Services (AWS) cloud platform should have tremendous growth prospects fueled by the adoption of generative AI.
As was the case with Oracle and Alibaba, Amazon also has a tight connection with Nvidia. AWS has used Nvidia's GPUs for years. But Amazon is also at least somewhat of a rival to Nvidia as well. The company has developed its own Trainium and Inferentia AI chips that AWS customers can use with their AI apps.
4. Microsoft
Tepper also increased his position in Microsoft (MSFT 1.82%) by nearly 4% in Q4. The massive tech company currently ranks as Appaloosa Management's second-largest holding, making up 11.3% of its portfolio.
Microsoft has been another solid winner so far this year. AI continues to serve as a major growth driver for the company, which has integrated OpenAI's GPT-4 throughout its products.
Unsurprisingly, Microsoft is yet another key partner with Nvidia. Among other things, the two companies are working together to connect Nvidia's AI Enterprise software with Microsoft's Azure Machine Learning platform. Like Amazon, though, Microsoft has also developed its own AI chips that could help it reduce its dependence on Nvidia.
