David Tepper, Who Netted $7B in the '08 Crisis, Trims Mag 7 Holdings in Q3 for AMD, Qualcomm

Billionaire investor David Tepper is known for his high-risk, aggressive investing style. As the founder of the Appaloosa Management hedge fund, Tepper has made a fortune through contrarian calls and bets on distressed assets.

During the 2008 financial crash, which drove banks' values to record lows, Tepper heavily invested in distressed assets. As an opportunistic fund manager, he bought nearly $2 billion (£1.5 billion) worth of commercial mortgage-backed securities from AIG at face value. He soon profited by $7 billion (£5.3 billion) on the trade after the US government stepped in to save the banks.

He founded Appaloosa in 1993 with $57 million (£43.3 million) in capital. The portfolio returned 57% in the first six months and continued to succeed by investing in the debt of troubled firms like WorldCom and Enron. Tepper has amassed a personal net worth of $23.7 billion (£18 billion), solidifying his reputation as one of the most successful and influential hedge fund managers globally.

Insight into Tepper's Stock Sales in Q3

Appaloosa significantly reduced its exposure to AI tech giants, including the Chinese company Alibaba (NYSE:BABA). It also sold heavily in multiple ride-hailing firms. Here's a summary of the major stocks sold in Q3:

• 8 million shares of Intel (Nasdaq: INTC)
• 2.4 million shares of Lyft (Nasdaq: LYFT)
• 200,000 shares of Amazon (Nasdaq: AMZN)
• 112,500 shares of Alphabet Class C (Nasdaq: GOOG)
• 150,000 shares of Oracle (NYSE: ORCL)
• 35,500 shares of Microsoft (Nasdaq: MSFT)
• 30,000 shares of Meta Platforms (Nasdaq: META)
• 343,020 shares of Uber Technologies (NYSE: UBER)

These sales suggest Tepper is distancing himself from most AI stocks, aligning with other top hedge funds like Michael Burry's Scion Asset Management and Ray Dalio's Bridgewater Associates. Both of these funds have also expressed caution about inflated valuations and concerns of an AI bubble.

Tepper's exit from Intel shares may come as a surprise, given the stock has risen nearly 60% in the past six months — most gains after the US government invested $11.1 billion (£8.4 billion) in August for a 10% stake. Despite the government backing and hopes for a recovery, Bernstein analysts remain sceptical, describing Intel as 'fundamentally challenged'.

Tepper's Purchases: Nvidia, AMD, and Qualcomm

In Q3, Nvidia was the only Magnificent 7 stock Tepper bought. His firm purchased 150,000 shares for $25.8 million (£19.6 million), increasing its stake in the AI leader by 8.5%.

Appaloosa also added Advanced Micro Devices (Nasdaq: AMD), buying 950,000 shares for $144.2 million (£109.6 million). AMD reported a Q3 revenue and earnings beat, driven by growth in its data centre segment. The company announced major deals with Microsoft-backed OpenAI, Oracle, IBM (NYSE:IBM), and the US Department of Energy to build next-generation supercomputers. AMD also noted rapid customer momentum for its AI platforms.

Additionally, the fund increased its stake in Qualcomm (Nasdaq: QCOM) by 895,000 shares, worth about $145.7 million (£110.8 million).

Overall Sector Outlook

Overall, hedge fund managers are taking a cautious stance on AI, favouring companies with strong fundamentals and avoiding inflated stocks struggling to deliver AI output relative to their investments.

Disclaimer: Our digital media content is for informational purposes only and not investment advice. Please conduct your own analysis or seek professional advice before investing. Remember, investments are subject to market risks and past performance doesn't indicate future returns.