Over the last four years, no trend has shaped Wall Street or corporate America quite like the evolution of artificial intelligence (AI). The reason the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite have all vaulted to record highs is that AI substantially increases the long-term growth potential for businesses -- and Wall Street's savviest money managers have taken notice.
Quarterly Form 13F filings allow investors to track which stocks fund managers with at least $100 million in assets under management have been buying and selling. While AI has been an obvious theme, arguably, no billionaire investor has embraced this trend quite like Appaloosa's investment chief, David Tepper.
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Appaloosa's billionaire boss is wagering big on the AI revolution
Tepper closed out the March quarter with Appaloosa holding 39 positions worth more than $5.9 billion. However, six of these positions collectively account for 56% of invested assets -- and their fates are intricately tied to the AI revolution.
Billionaire David Tepper's largest holdings include:
- Amazon (AMZN +1.13%): 15.2% of invested assets
- Micron Technology (MU +1.93%): 9.5%
- Alphabet (GOOGL +1.54%)(GOOG +1.52%): Specifically, Class C (GOOG), 8.4%
- Uber Technologies (UBER 0.40%): 7.7%
- Taiwan Semiconductor Manufacturing (TSM +1.01%): 7.6%
- Alibaba Group (BABA +4.67%): 7.3%
With the exception of Uber, which is integrating AI solutions into its ride-hailing platform and is a trailblazer in its own way, all of these companies can be considered critical to the evolution of AI.
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David Tepper's portfolio is packed with AI stocks that possess sustainable moats
Businesses are spending a jaw-dropping amount of money building out their data centers, and AI hardware has been virtually impossible to keep on the proverbial shelf. Tepper has built up sizable stakes in two of the most important hardware players for the data center build-out: Micron and Taiwan Semiconductor (commonly known as "TSMC").
TSMC is the world's leading advanced chip fabricator, while Micron Technology is one of the most important suppliers of high-bandwidth memory (HBM). HBM is a practical necessity in AI data centers, allowing for ultra-fast data transfer rates when connected directly to graphics processing units (GPUs). TSMC is producing GPUs at capacity, while orders for Micron's HBM are booked years in advance. Suffice it to say, both companies are enjoying exceptional demand and pricing power.
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Meanwhile, Amazon, Alphabet, and Alibaba represent the pinnacle of AI applications in action. Amazon Web Services (AWS) and Google Cloud rank first and third globally in cloud infrastructure services spend, while Alibaba is the top dog in cloud infrastructure services market share in China.
Amazon, Alphabet, and Alibaba have all integrated generative AI and large language model solutions into their respective platforms, and they've all seen sales growth in these high-margin segments accelerate since doing so. Sales growth for AWS jumped to 28% in the first quarter, while Alphabet recorded a 63% revenue jump from Google Cloud. As for Alibaba, it registered 38% sales growth from its Cloud Intelligence Group in the March-ended quarter.
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Whether we're talking hardware or AI applications, TSMC, Micron, Amazon, Alphabet, and Alibaba are paramount to the global success of artificial intelligence. Appaloosa's billionaire boss knows this, which is likely why he's piled into these stocks.
