David Tepper and his hedge fund, Appaloosa Management, have a strong track record of investing success, and their stock moves are well worth paying attention to.
And, right on schedule on Feb. 17, Tepper provided all of us with a snapshot of the trades he made during the fourth quarter, via his quarterly Form 13F disclosure. The Securities and Exchange Commission requires large institutional investment managers like Appaloosa to submit those forms, which list their holdings as of the end of each quarter, no later than 45 days after the period ends.
Tepper made five moves within his top 10 holdings in Q4 that particularly intrigue me, including increasing his position sizing in several key artificial intelligence (AI) businesses. Investors would be wise to have these stocks on their radar, as Tepper's moves confirm that smart money sees value in them.
Image source: Getty Images.
1. Alphabet
Alphabet (GOOG 1.69%) (GOOGL 1.66%) is Tepper's second-largest holding, accounting for about 8.2% of Appaloosa's portfolio. During Q4, he increased Appaloosa's stake in Alphabet by nearly 29%. That was a sizable move, and shows that his team is bullish on the tech giant.
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This makes a ton of sense because Alphabet has roared back from being in nearly dead-last place in the generative AI race to take a position among the leaders. It now has a bright future in the AI arena, and Tepper's investment in it is a large vote of confidence.
2. Micron
Micron (MU 3.21%) makes memory chips, and that market is a bit commoditized -- there's less differentiation among the competing offerings. However, all of the high-end digital memory that the industry will be able to produce this year has already been spoken for, due to massive demand from the large AI firms building data centers. The global shortage has allowed Micron to boost prices significantly, sending its revenue and profits soaring.
Before Q3, Micron wasn't a large position for Appaloosa. However, it tripled its stake during Q4, which has proven to be a hugely successful move. If Appaloosa added to its position at the start of Q4, the shares it bought are up by an incredible 130% now. Even if it waited until the last day of the quarter, it would be sitting on a 46% gain.
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3. Meta Platforms
Appaloosa increased its position in Meta Platforms (META 2.52%) by 62% during Q4, but that trade hasn't worked out nearly as well as the Micron trade. The market is growing more concerned about Meta's AI spending spree, which isn't showing any real cash-generating potential right now. As a result, the stock sold off heavily in Q4, primarily after the company reported its Q3 results.
At its low point, the stock was down nearly 25% from its all-time high and hasn't really rebounded much since then. Meta is more of a long-term turnaround play, as it will either need to slow its AI spending or start to show some returns on investment from all of the cash it has spent. It could be some time before either of those things happens, but a huge rally could occur sometime down the road, and if you're a patient investor, you could buy in now and wait for it.
4. Taiwan Semiconductor
Taiwan Semiconductor (TSM 4.96%) is an investment that just makes sense. The chip foundry giant is a clear beneficiary of the record-setting capital expenditures that tech companies are making on data centers, because it manufactures the majority of the high-end logic chips that go into high-tech devices, like those used for AI.
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Taiwan Semiconductor is an excellent way to play the AI trend without having to guess which chip designers or software developers will be the direct winners, which is why it makes sense that Tepper increased his stake in it during Q4.
5. Microsoft
Last is Microsoft (MSFT 0.73%). Tepper didn't add much to his position in it during Q4 -- he only increased it by 8%. However, I'm willing to bet the firm is increasing it during this quarter. Microsoft stock sold off pretty aggressively after the company's last earnings report, for really no good reason. Now, the stock is down by more than 25% from its all-time high and trading at a valuation lower than it has seen in quite some time.
MSFT Operating PE Ratio data by YCharts.
Microsoft looks like a strong buy at these prices, and when the next set of 13F filings comes out about three months from now, I'm willing to bet that we will learn that Microsoft is a stock that Tepper and Appaloosa loaded up on in 2026's first quarter.
