Among small retail investors, following what billionaire hedge fund managers are doing is a popular strategy. While it's not perfect, it has several advantages, among them that it allows you to piggyback on some of the expensive research done by the largest actively managed funds in the world. However, there are some caveats to this strategy.
One billionaire whom I follow is David Tepper, who founded and runs Appaloosa Management. He has a great track record of success, so seeing that he reduced his stakes in Nvidia (NVDA 1.24%) and Amazon (AMZN 1.30%) last quarter was a head-scratcher, as these two stocks have been long-term winners.
Does he have information that we don't? Or is there something else going on here?
Image source: Getty Images.
We're looking at old information
Investors only get a snapshot that shows what moves hedge fund managers have made in a given quarter 45 days or so after that quarter ends. So, if you're trying to follow a fund manager who trades in and out of positions frequently, the strategy of taking your cues from their quarterly filings with the Securities and Exchange Commission isn't going to work. To make this method work, one needs to apply it to investors with a longer mindset, like Tepper.
Information about what investments these fund managers hold as of the end of each quarter is made available to the public via a Form 13F, but if, for example, Tepper sold shares on the first trading day of the fourth quarter, Oct. 1, we could be making decisions based on information that's at this point five months old. So, investors must consider all of the events that have happened in the context of Tepper selling shares of Amazon and Nvidia.
NASDAQ: NVDA
Key Data Points
In Q4, Tepper decreased his Nvidia stake by about 10%. That type of move could be nothing more than profit taking, as he made a huge investment in Nvidia during Q2 2025. That was right in the middle of the massive market drawdown triggered by fears of what President Donald Trump's tariffs would do to the U.S. economy, and Nvidia's stock has risen substantially since then.
Tepper sold a similar percentage of his Amazon stake in Q4 -- he decreased his position by 13%. Once again, this could be profit taking. Or, he could have wanted to free up to invest in other stocks.
This is a key point, as it shows that Tepper and Appaloosa Management aren't bearish on the artificial intelligence data center buildout. Based on the stocks they bought in Q4, they're actually bullish on it.
Tepper and Appaloosa still bought AI stocks in Q4
Tepper's buys last quarter included Alphabet, Micron Technology (MU 3.18%), and Meta Platforms. He increased his stakes in those three stocks by 29%, 200%, and 62%, respectively. All of them are highly exposed to the AI buildout trend, so Tepper's pivot away from Amazon and Nvidia likely had more to do with a desire to diversify and take profits.
None of these investments has worked out as well as Micron, as it's up nearly 50% so far in 2026. The memory chip shortage that has resulted from the ongoing data center buildout is real, and it's causing their prices to soar. Memory chips are fairly commoditized, so any spike in demand can send shock waves through the tech sector.
NASDAQ: MU
Key Data Points
All the memory chips that can be produced in 2026 have already been bought up, and the shortage could extend for several more years as the various companies in this market work to expand their production facilities. This could provide a long-term boost to Micon's share price. It could go on to outperform other leading AI plays like Nvidia from here.
I think the biggest takeaways from Tepper's moves in Q4 are that investors should not be afraid to take some profits, and that they should be open to new stock ideas. Micron wasn't a popular pick at this time last year, but it has quickly emerged as one over the past few months. Nvidia has been a top AI pick from the start of the AI data center buildout, although the stock's momentum has faltered in recent months.
Using Tepper's portfolio moves as a source of ideas can be a smart move. While investors shouldn't follow in his footsteps blindly, paying attention to them can pay off big time.
