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David Tepper, a prominent billionaire investor, has shown a strong inclination towards artificial intelligence (AI), with all of his top 10 holdings tied to the sector.
However, his enthusiasm for some of these artificial intelligence stocks has faded lately. During the first quarter, Tepper reduced his stakes in Amazon, Google parent company Alphabet, Microsoft, Facebook parent company Meta Platforms and Nvidia. Instead, he made many more investments in three other companies related to artificial intelligence.
1. Alibaba Group holding company
This is evident from Tepper’s Appaloosa Management portfolio Alibaba Group Holding Ltd (NYSE:BABA) as the largest investment. After Tepper increased its investment by about 159% in the first quarter, the Chinese tech giant surpassed Amazon, Microsoft, Meta and Nvidia. After rising 17% in April and May, Alibaba shares are up nearly 11% this year; this action has already paid off.
Alibaba’s attractive valuation stock, which trades below 10.5 times forward earnings, and a price-to-earnings-growth (PEG) ratio of 0.82 is likely driving Tepper’s increasing interest in the company. The company’s recent performance confirms Tepper’s confidence: Alibaba posted 7% year-over-year revenue growth in the first quarter and aggressively cut prices in China’s AI services market to fuel expansion.
2. Oracle
Appaloosa Management increased its ownership Oracle Corp (NYSE:ORCL) rose over 74% in the first quarter, putting the stock in ninth place 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 earnings numbers remain around 20 even with this increase, making it cheaper than many other major artificial intelligence companies.
Tepper likely finds Oracle’s cloud business especially intriguing, with Oracle’s cloud revenues skyrocketing 25% year over year to $5.1 billion in the most recent quarter. Strong demand for Oracle’s Gen2 AI architecture, highlighted by CEO Safra Catz, drove the expansion of the cloud unit.
3. PDD companies
PDD Holdings Inc (NASDAQ:PDD) is now the ninth largest investment in Appaloosa Management’s portfolio. In the first quarter, Tepper bought nearly 1.3 million shares of the Chinese IT company, increasing his ownership by about 171%. PDD operates Temu, a new online marketplace with a global focus, and Pinduoduo, a well-known e-commerce site in China.
Despite a difficult first quarter, PDD has recovered impressively, with shares down more than 25%. This is supported by positive first quarter figures, which show a 131% year-on-year increase in sales 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 article David Tepper’s AI Stock Picks: 3 Hidden Gems Amid Major Tech Selloff originally appeared on Benzinga.com
