Investors are always looking for smart money managers to get ideas from. One investor I like to follow is David Tepper, the billionaire founder of Appaloosa Management. And, fortunately, I can get information on Appaloosa's trades following the end of each calendar quarter, when institutional investment firms managing over $100 million in stocks are required to file a form 13F with the Securities and Exchange Commission (SEC).
The 13F is a public record of which stocks portfolio management firms bought and sold during the most recent quarter. This can be a useful tool, as it helps investors get an idea of what opportunities the "smart money" on Wall Street may prefer.
Per Appaloosa's latest 13F, the firm has exited its position in Advanced Micro Devices and initiated a position in Broadcom (AVGO -4.09%).
Let's explore what may have motivated Tepper's firm to dump AMD stock and swap it for Broadcom.
Why selling AMD stock might make sense right now
Given Appaloosa's prior trading history, the firm's reduced exposure to AMD is hardly a surprise.
| Category | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 | Q1 2025 |
|---|---|---|---|---|---|
| AMD shares owned | 1.6 million | 1.4 million | 1.1 million | 1.2 million | 0 |
Data source: Hedge Follow.
With the exception of a small buy during the fourth quarter of 2024, Appaloosa had steadily been trimming its AMD position prior to completely exiting it earlier this year.
While AMD is somewhat diversified, the company is facing a number of challenges right now. For starters, two of the company's core businesses have been decelerating for a while now. And despite some impressive traction in its data center GPU operation, the company still trails Nvidia by miles.
Sure, AMD has a number of new chipsets that are scheduled to be released during the second half of this year and during 2026,. However, so does Nvidia.
This means that despite its innovative efforts, AMD is likely going to continue facing an uphill battle in the data center chip market thanks to Nvidia's commanding lead. Given the unpredictability of its growth prospects, perhaps Tepper decided to move on.
Image source: Getty Images.
Why buying Broadcom stock looks like a good move
I like Tepper's decision to get in on Broadcom stock for several reasons.
First, Broadcom is a diversified operation -- boasting 26 different business units. The company specializes in supplying network equipment that's critical for outfitting AI data centers. The company is also a rising star in the custom silicon movement.
In addition, a couple of months ago, Broadcom's management announced that the company's board of directors had approved a new $10 billion share repurchase program. Typically, when a company decides to buy back its own stock, management feels that shares may be undervalued and is bullish about the company's future growth prospects.
Lastly, Broadcom is still in the early phases of monetizing several new assets from its VMware acquisition.
I see Broadcom as a unique opportunity in the AI infrastructure realm. The company has the ability to benefit from multiple expanding markets stitched together through AI, but does not hinge on a particular product or service offering.
Is Broadcom stock a good buy right now?
Trading at a forward price-to-earnings (P/E) multiple of 36.4, Broadcom stock isn't exactly a bargain. Taking advantage of the depressed price action throughout the first quarter, as Appaloosa apparently did, is already looking like a savvy move.
AVGO PE Ratio (Forward) data by YCharts
With that said, investors shouldn't focus too much on when exactly they buy a stock. Timing your buys is often an exercise in false precision, especially for investors with long time horizons.
The big-picture theme is that AI capital expenditures are on the rise. This is a multiyear tailwind that bodes well for Broadcom and its various businesses.
To me, the company's next phase of growth is still in the early innings and I see Broadcom stock as a no-brainer buy right now.
