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David Tepper, a prominent billionaire investor, has shown a strong inclination toward artificial intelligence (AI), with all his top-10 holdings linked to the sector.
However, his enthusiasm for some of these artificial intelligence stocks has lately faded. During the first quarter, Tepper reduced his stakes in Amazon, Google parent Alphabet, Microsoft, Facebook parent Meta Platforms, and Nvidia. Instead, he made many more investments in three other companies linked to artificial intelligence.
1. Alibaba Group Holding
Tepper’s Appaloosa Management portfolio shows Alibaba Group Holding Ltd (NYSE:BABA) as the biggest investment. After Tepper increased his investment by approximately 159% in the first quarter, the Chinese tech giant surpassed Amazon, Microsoft, Meta, and Nvidia. After a 17% increase in April and May, Alibaba’s stock has surged nearly 11% year-to-date; hence, this action has already paid off.
Alibaba’s appealing valuation shares trading under 10.5 times forward earnings and a price-to-earning-to-growth (PEG) ratio of 0.82 probably drive Tepper’s increasing interest in the company. The company’s recent performance validates Tepper’s confidence, with Alibaba posting a 7% year-over-year sales gain in Q1 and aggressively lowering pricing in the Chinese AI services market to propel expansion.
2. Oracle
Appaloosa Management raised its ownership in Oracle Corp (NYSE:ORCL) by over 74% in Q1, driving the stock to rank ninth in Tepper’s portfolio. Despite a slight drop in April, Oracle has enjoyed strong momentum, with its stock up roughly 20% this year. Oracle’s forward-earnings multiple stays around 20 even with this increase, making it less expensive than many other major artificial intelligence firms.
Tepper probably finds Oracle’s cloud business especially intriguing, with Oracle’s cloud revenue skyrocketing 25% year over year to $5.1 billion in its most recent quarter. Strong demand for Oracle’s Gen2 AI architecture, highlighted by CEO Safra Catz, drove expansion for the cloud unit.
3. PDD Holdings
PDD Holdings Inc (NASDAQ:PDD) is now the ninth-largest investment in Appaloosa Management’s portfolio. In Q1, Tepper bought almost 1.3 million shares of the Chinese IT company, raising his ownership by around 171%. PDD runs Temu, a new online marketplace aiming worldwide, and Pinduoduo, a well-known e-commerce site in China.
Despite a difficult Q1, PDD has rallied impressively, with shares declining over 25%. This is supported by positive Q1 numbers showing a 131% year-over-year sales rise and a tripling of adjusted profitability. With shares trading at 16.4 times forward earnings and a PEG ratio of 0.71, Tepper most likely values PDD’s valuation and sees Temu’s expansion approach as a good long-term growth driver.
Story continues
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This article David Tepper’s AI Stock Picks: 3 Hidden Gems Amidst Big Tech Sell-Off originally appeared on Benzinga.com
