As founder of the hedge fund company Appaloosa Management, David Tepper has built a reputation for bold, often contrarian bets -- particularly in distressed assets. Investors monitor his moves closely because his track record includes legendary gains even during the toughest economic cycles.
New 13F filings reveal that during the second quarter, Appaloosa sold its entire position in Sandisk (SNDK -0.28%) while initiating a new stake in Broadcom (AVGO +1.21%). These moves offer a window into how Tepper is navigating the current chapter of the artificial intelligence (AI) revolution.
Image source: The Motley Fool.
Why selling Sandisk stock makes sense
Sandisk produces NAND flash memory, the high-speed storage technology that powers solid-state drives (SSDs). In the AI infrastructure era, these products have become indispensable because AI data centers require vast amounts of fast, dense storage to hold training data and inference workloads. AI-driven demand has fueled NAND prices sharply in recent quarters, shifting Sandisk's revenue mix toward enterprise data center customers. Revenue and margins are expanding dramatically as sales surge and pricing power returns to the storage specialist.
Filings show that Tepper initiated the Sandisk position during the first quarter of 2026 and subsequently exited completely sometime in the second quarter. While exact entry and exit prices are private, the timing alone implies substantial gains.
Taking profits after such a parabolic move signals discipline. Smart investors understand that memory and storage markets are cyclical, meaning Sandisk's valuation may already price in much of the near-term AI surge. By securing gains after a single quarter, Tepper reduces exposure to unwanted volatility while freeing capital for other opportunities.
David Tepper. Image source: Getty Images.
Why Broadcom might appeal to Tepper
Broadcom designs and supplies semiconductors and infrastructure software. Over the last few years, the company has focused on custom AI accelerators known as XPUs. These chips are designed alongside hyperscale customers, rather than being sold as general-purpose products.
Broadcom makes Google's Tensor Processing Units (TPUs) as well as Meta Platforms' MTIA chips. The company also expanded relationships with OpenAI, Anthropic, and Apple, further diversifying the customer base. Broadcom also supplies high-speed networking silicon that connects large clusters of these accelerators, giving the company exposure to both the compute and interconnect layers of the AI chip stack.
Despite trading at a lofty valuation based on price-to-earnings (P/E) and forward earnings multiples, Broadcom remains an attractive opportunity given its growth potential. AI semiconductor revenue is scaling rapidly, with management guiding for more than $100 billion in this segment alone by fiscal 2027.
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Robust operating margins, a wide competitive moat in custom silicon, and a backlog of multi-year orders support Broadcom's premium valuation profile. For an investor like Tepper, the combination of visible multi-year growth, sticky customer relationships, and market leadership in a shift toward specialized AI hardware may outweigh rich multiples.
Should investors follow Tepper's lead and buy Broadcom stock?
Tepper's rotation away from a high-flying memory name into a broader AI infrastructure stock reflects disciplined capital allocation rather than an endorsement of any specific stock. Smart investors can reasonably take note of his logic: Book gains after an abnormal rally and redeploy capital into a company with deeper competitive advantages and potentially longer runway.
While Sandisk's recent pullback from its June peak has so far validated Tepper's exit, Broadcom's elevated valuation leaves little room for error. Against this backdrop, simply following Tepper's trade carries risks.
NASDAQ: AVGO
Key Data Points
In my eyes, the more prudent approach is to study his underlying thesis rather than copying the ticker symbols. Investors who share Tepper's conviction in sustained AI capex spending from big tech may find Broadcom a compelling long-term holding. With that said, those who prefer pure play memory exposure could still find opportunities in the sector even after volatility subsides.
Regardless, Tepper's latest moves underscore a timeless lesson: Even the best investment ideas eventually require some harvesting, and the strongest portfolios always adjust to the market rather than remaining static.
