Few hedge fund managers have been as all-in on artificial intelligence (AI) as David Tepper. His Appaloosa fund's portfolio has been stacked with AI stocks for quite a while.
However, the billionaire investor doesn't appear to be as enamored with AI these days. Tepper slashed his positions in several AI stocks in the second quarter of 2024.
Tepper's top five AI cuts in Q2
Each of Appaloosa's top five holdings has a major focus on AI. However, Tepper reduced his hedge fund's positions in all of them in Q2.
He sold 750,000 shares of Alibaba Group Holding (BABA 2.25%), decreasing Appaloosa's stake in the Chinese internet company by roughly 6.7%. However, Alibaba remains the hedge fund's largest position, making up around 12.2% of its portfolio.
NYSE: BABA
Key Data Points
Tepper cut Appaloosa's stake in Amazon (AMZN 3.98%) by 9.2% with his sale of 353,000 shares of the e-commerce and cloud services leader. This wasn't enough to bump Amazon from its perch as the second-biggest holding for the hedge fund, though.
The billionaire investor sold more than 15.6% of his position in Microsoft (MSFT 2.44%). Despite this significant reduction, the tech giant is still Appaloosa's third-largest holding.
NASDAQ: MSFT
Key Data Points
Although Meta Platforms (META 4.08%) held onto its No. 4 ranking among Appaloosa's biggest positions, the hedge fund owns a lot less of the social media and metaverse company now. Tepper dumped more than 15.6% of Appaloosa's stake in Meta in Q2.
He also sold 150,000 shares of Alphabet (GOOG 2.39%) (GOOGL 2.35%), reducing Appaloosa's stake in the Google parent by more than 7.2%. However, the sale transactions didn't cause Alphabet to lose its spot as the hedge fund's fifth-largest holding.
NASDAQ: GOOGL
Key Data Points
Why is Tepper selling these AI stocks?
Tepper hasn't stated publicly why he decided to reduce Appaloosa's positions in its top AI stocks. All we can do is speculate about his reasoning.
It's striking that the hedge fund manager didn't limit his selling to only one or two AI stocks. Tepper reduced Appaloosa's stakes in Alibaba, Amazon, Microsoft, Meta, and Alphabet, as well as several other AI stocks.
He didn't completely throw in the towel on AI stocks, though. For example, Tepper increased his hedge fund's positions in Adobe and ASML Holdings.
Perhaps he was concerned about premium valuations in some cases. However, that can't be true across the board. Alibaba, for example, trades at a low forward price-to-earnings ratio of 9.4. Alphabet and Meta stocks don't look overly expensive based on their price-to-earnings-to-growth (PEG) multiples. Also, some of the stocks Tepper bought in Q2 have higher valuations than some he sold.
Maybe the best guess behind why Tepper slashed his positions in most of these five AI stocks is that he wanted to take some profits off the table. With the exception of Alibaba, all the other top AI stocks in Appaloosa's portfolio were up solidly year to date in Q2.
Should you sell them, too?
Every investor has their own objectives to consider when buying and selling stocks. Just because a famous investor like Tepper is selling his biggest AI stock holdings doesn't mean you should automatically follow suit.
Alibaba should have great long-term prospects offering AI cloud services in China. It's a similar story for Amazon, Alphabet, and Microsoft in the U.S., Europe, and other key markets.
Meta is using AI to increase the monetization of its social media apps and could have a big opportunity in the business AI arena. I think that all five of the top AI stocks Tepper sold in Q2 could be attractive picks to buy for many long-term investors.
