Some hedge funds hold positions in hundreds, if not thousands, of stocks. That's not the case with David Tepper's Appaloosa fund. Its portfolio includes a relatively small 45 holdings.
Tepper didn't become a billionaire by ignoring hot areas that other investors were piling into. Unsurprisingly, several of the stocks owned by Appaloosa focus on artificial intelligence (AI). During the third quarter of 2025, Tepper increased his AI exposure significantly by loading up on three AI stocks, in particular.
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1. Advanced Micro Devices
Appaloosa's biggest new position in Q3 was a stake in Advanced Micro Devices (AMD 3.79%). The hedge fund bought 950,000 shares of the chipmaker valued at $153.7 million at the end of the quarter.
AMD aims to narrow the gap somewhat with its largest rival, Nvidia (NVDA +2.24%), whose GPUs dominate the AI chip market. Tepper might believe the company can achieve this goal: His purchase of AMD's shares in Q3 was significantly larger than the 8.6% increase in Appaloosa's position in Nvidia.
NASDAQ: AMD
Key Data Points
Tepper's bet is already paying off. Since the end of Q3, AMD's share price has increased by nearly 70%. This impressive momentum is a direct result of the company's major business advances in recent months.
In particular, AMD announced a strategic partnership with OpenAI in October. It also unveiled an ambitious strategy that features plans to deliver a revenue compound annual growth rate of more than 35%.
2. Baidu
Internet giant Alibaba Group (BABA 0.16%) is Appaloosa's largest holding. However, Tepper seems to be more bullish on another Chinese tech stock these days: Baidu (BIDU 1.43%). He increased his hedge fund's stake in Baidu by 67.2% in Q3.
Baidu is sometimes referred to as the "Google of China" due to its similarity to Alphabet's (GOOG +3.36%) (GOOGL +3.36%) Google unit. Like Google, Baidu operates a leading search engine. The Chinese company is also a cloud service provider and runs an autonomous ride-hailing service.
NASDAQ: BIDU
Key Data Points
Tepper's decision to buy more shares of Baidu looks smart in retrospect. The stock has jumped more than 30% since the end of Q3.
Even with this strong gain, though, Baidu remains attractively valued. Its forward price-to-earnings ratio is below 16, significantly lower than top U.S. AI stocks.
3. Qualcomm
Tepper also loaded up on another chip stock in Q3, Qualcomm (QCOM +1.05%). He increased Appaloosa's position in Qualcomm by a whopping 255.7%.
Qualcomm continues to generate more than 60% of its total revenue from chips for phones, with Apple (AAPL +1.18%) ranking as its largest customer. However, the company is also enjoying solid growth in its automotive and Internet of Things (IoT) businesses.
NASDAQ: QCOM
Key Data Points
Buying additional Qualcomm shares hasn't been as lucrative for Tepper as the purchases of AMD and Baidu have been so far. Qualcomm's stock is up by a low single-digit percentage since the end of Q3.
But the company's move into the data center and robotics markets could pay off handsomely over the long run. Qualcomm announced in October that it will launch new AI accelerators, competing head-to-head with AMD and Nvidia.
Tepper's best AI move in Q3?
Which of these purchases ranks as Tepper's best AI move in Q3? I like his decisions to buy shares of AMD, Baidu, and Qualcomm. However, if I had to pick the one best move of all, my vote would go to the billionaire hedge fund manager initiating a significant new stake in AMD.
I don't expect AMD to dislodge Nvidia from its perch at the top of the AI chip market. However, the company doesn't have to topple its key rival to still be a huge winner. My hunch is that AMD will be able to make greater inroads with hyperscalers as well as other customers deploying AI models.
