Billionaire investor David Tepper of Appaloosa Management has made a name for himself as one of the world’s top investment minds. The hedge fund manager is worth an estimated $23.7 billion, and he was recently busy selling high-flying memory stocks while adding to positions in several Magnificent Seven names.
This includes Amazon (NASDAQ: AMZN), Meta Platforms (NASDAQ: META), Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOGL), and Nvidia (NASDAQ: NVDA). Let’s dive into why Tepper likely likes these stocks.
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Amazon
Tepper’s largest position is in Amazon, representing over 15% of his portfolio, and he was adding more shares in Q2. It’s easy to see why Tepper would like the stock. Amazon is both the market leader in cloud computing and e-commerce, and it’s been showing strong growth in both areas.
The company’s cloud computing unit, AWS, has been seeing accelerating growth, with revenue climbing 37% year over year in Q2, its fastest growth in four and a half years. With a huge backlog, partnerships with Anthropic and OpenAI, and the company spending aggressively on high-return AI infrastructure projects, the strong growth should continue.
Amazon also has an important custom chip business that is growing quickly, while it also uses the chips to help reduce its own internal inference costs.
On the e-commerce side, the company is seeing great operating leverage come from its internal investments in robotics and AI. It’s also developed a large high-margin digital ad business that continues to grow quickly. Between its cloud computing and e-commerce opportunities, Amazon is a top stock to own.
Meta Platforms
Tepper was also aggressively scooping up shares of Meta Platforms in the quarter. While some investors have been concerned about the company’s AI infrastructure spending, it looks like one of the best values among megacap growth stocks. It has a forward P/E of 16 times 2027 analyst estimates, while it just grew its revenue by 28% in the second quarter.
The company has one of the best flywheel business models out there for AI, with AI advancements helping both keep users on its sites longer and advertisers better reach and convert them into customers. Meta has also made strong progress with its newest AI models and is looking to become an important overall AI player. In addition, the company has a long runway of growth from it just starting to introduce ads to its Threads and WhatsApp platforms.
Alphabet
Alphabet is Tepper’s fourth-largest holding, and he was adding to the position in Q2. Alphabet is the most complete AI company, having both its own top-tier chips and AI models.
Its biggest advantage is its tensor processing units (TPUs), which it developed more than a decade ago and which it has built its entire hardware and software stack around. This gives it a cost edge for internal use and a nice margin boost from customers that opt for them with Google Cloud. It is also starting to let some large select customers like Anthropic deploy the chips in their own data centers.
Meanwhile, Alphabet’s core search business continues to grow nicely, with AI-powered features, like AI Mode and AI Overviews, helping drive query growth. It also owns one of the largest streaming services in the world, YouTube, and has a big emerging opportunity with its robotaxi business Waymo.
A great set of emerging and leading businesses, Alphabet is a solid core holding.
Image source: Getty Images
Nvidia
During Q2, Tepper also added to his Nvidia position, which is another top-10 holding. Nvidia has been the king of AI infrastructure, with its graphics processing units (GPUs) the main chips used to train AI models. Meanwhile, the company also has a nice opportunity in the inference market, where the combination of its GPUs and the language processing units (LPUs) it attained through its “acquisition” of Groq, gives it a unique end-to-end solution.
With the stock cheap, trading at a forward P/E of 17.5 times fiscal 2028 (ending January 2028) analyst estimates, and continuing to grow rapidly, Nvidia looks like a nice buy at current levels.
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Geoffrey Seiler has positions in Alphabet, Amazon, and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.
