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David Tepper, a high-profile billionaire investor, has shown a strong penchant for artificial intelligence (AI), with his top 10 holdings tied to the sector.
However, his enthusiasm for some of these artificial intelligence stocks has recently faded. During the first quarter, Tepper reduced its stakes in Amazon, Google parent Alphabet, Microsoft, Facebook parent Meta Platforms, and Nvidia. Instead, he invested significantly more in three other artificial intelligence-related companies.
1. Alibaba Holding Group
Tepper’s Appaloosa Management portfolio shows Alibaba Group Holding Ltd (NYSE:BABA) as the biggest investment. After Tepper increased its investment by around 159% in the first quarter, the Chinese tech giant overtook Amazon, Microsoft, Meta and Nvidia. After an increase of 17% in April and May, Alibaba Stock has jumped nearly 11% since the start of the year; therefore, this action has already borne fruit.
The attractive valuation of Alibaba shares trading at less than 10.5 times forward earnings and a price-to-earnings-to-growth (PEG) ratio of 0.82 are likely behind Tepper’s growing interest in the ‘business. The company’s recent performance confirms Tepper’s confidence, with Alibaba posting a 7% year-on-year sales gain in the first quarter and aggressively lowering prices in China’s AI services market to drive expansion.
2.Oracle
Appaloosa Management increased his property In Oracle Corp. (NYSE:ORCL) by more than 74% in the first quarter, which placed the stock ninth in Tepper’s portfolio. Despite a slight decline in April, Oracle has seen strong momentum, with its stock up about 20% this year. Oracle’s forward earnings multiple remains around 20 even with this increase, making it cheaper than many other major AI companies.
Tepper likely finds Oracle’s cloud business particularly intriguing, with Oracle’s cloud revenue soaring 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, has spurred the cloud unit’s expansion.
3. PDD assets
PDD Holdings Inc. (NASDAQ:PDD) is now the ninth largest investment in Appaloosa Management’s portfolio. In the first trimester, Tepper purchased nearly 1.3 million shares of the Chinese IT company, increasing its stake by approximately 171%. PDD operates Temu, a new global online marketplace, and Pinduoduo, a well-known e-commerce site in China.
Despite a tough first quarter, PDD saw an impressive rebound, with shares down more than 25%. This is supported by positive Q1 figures showing a 131% year-over-year sales increase 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 likes PDD’s valuation and sees Temu’s expansion approach as a good long-term growth driver.
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This item David Tepper’s AI Stock Picks: 3 Hidden Gems Amid the Big Tech Sell-Off originally appeared on Benzinga.com
