Billionaire investor David Tepper of Appaloosa Management was busy making moves to his portfolio in Q4. One of the more interesting themes to emerge was that Tepper trimmed his stakes in artificial intelligence (AI) chip stocks to buy shares of companies that are spending big on AI infrastructure.
During the quarter, he lowered his positions in both Nvidia (NVDA 1.21%) and Advanced Micro Devices (AMD 3.13%). He cut his Nvidia stake by more than 10%, while slashing his AMD position by two-thirds. Nvidia is still his seventh-largest position.
Image source: Getty Images.
However, these reductions don't look like a call that AI infrastructure spending is suddenly going to slow, as he tripled his position in memory maker Micron Technology (MU 3.18%), whose high-bandwidth memory (HBM) is packaged with graphic processing units (GPUs) to optimize performance. DRAM (dynamic random-access memory) is currently in a huge supercycle with high demand and short supply, and Micron is one of the best ways to tap into this market. He also added to his position in Taiwan Semiconductor Manufacturing (TSM 4.37%), which is supporting the manufacturing of GPUs and other AI chips.
NYSE: TSM
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Tepper seems to be buying the hyperscalers
While reducing his stakes in Nvidia and AMD, perhaps Tepper's most interesting move was that he funneled some of that money into three large hyperscalers (owners of massive data centers) that are spending a boatload of money on AI chips.
During the quarter, he increased his position in Alphabet (GOOGL 1.39%) (GOOG 1.63%) by nearly 30%, making it his second-largest position. Alphabet's cloud computing unit is growing quickly and seeing strong operating leverage, helped by the company using its own custom AI chips, which give it a cost advantage. With Alphabet having the most complete AI stack, with both its own chips and world-class Gemini AI model, it is easy to see why Tepper likes the stock.
NASDAQ: GOOGL
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At the same time, he increased his position in Meta Platforms (META 2.41%) by more than 60%, making it his fifth-largest holding. Meta has been one of the most successful companies at incorporating AI into its business to drive growth, and it plans to continue to invest aggressively in AI as a result. Right now, the company is hitting on all cylinders, with AI helping boost both ad impressions and prices. Meanwhile, it's got a nice opportunity, as it just began serving ads on its WhatsApp and Threads platforms.
Finally, he also added to his position in Microsoft (MSFT 0.20%), increasing his number of shares by 8%. Microsoft's Azure is seeing huge growth, and the company has huge locked-in commitments from OpenAI, which should continue to drive strong growth over the next several years.
With AI still looking like it is in its early innings, I think both the hyperscalers and the AI infrastructure names like Nvidia, Micron, and TSMC all look like solid long-term investments.
