Billionaire David Tepper Sold Micron and Sandisk, and Is Hedging Against 1 of Their Largest Customers

David Tepper is one of the greatest hedge fund managers of all time. He started Appaloosa Management in 1993 and went on to produce annualized returns of about 25% through mid-2019, at which point he had returned most of his outside investors' money.

Tepper has continued to produce excellent returns, now mostly managing his own money, taking concentrated and often contrarian positions to drive results. Appaloosa generated a massive 32% gross return in the first half of 2026 alone.

So, it's worth paying attention to the moves Tepper's making -- and you can, because he, like everyone who manages more than $100 million in assets, is required to disclose his fund's end-of-quarter holdings via a Form 13F four times a year.

Appaloosa's 13F for the second quarter (filed on schedule about 45 days after that period ended) showed that during the quarter, he sold two of the hottest stocks in the market: Micron (NASDAQ: MU) and Sandisk (NASDAQ: SNDK). Not only that, but he also bought put options (the right to sell shares at a set price within a preset period) on one of their biggest customers, which may suggest he sees something the market doesn't.

David Tepper, founder of Appaloosa Management. Image source: Getty Images.

Big moves in Tepper's portfolio

Tepper has been an investor in Micron for years, establishing a position in late 2016 and holding the memory-chip maker's stock through multiple earnings cycles. It's been his portfolio's largest single holding on multiple occasions. He made a big bet on the stock in the fourth quarter, adding 1 million shares to his position and call options controlling an additional 250,000 shares. He added even more shares in the first quarter. But after the huge run-up in the stock price, he cut his stake by 41% last quarter.

It's worth noting that Micron remained the second-largest position in the portfolio at the end of the quarter -- about 15% of Appaloosa's publicly traded equity portfolio. That said, the stock has accounted for up to 29% of Tepper's portfolio in the past. This suggests that he sees better investment opportunities now, or at least, sees the need to diversify away from memory-chip makers.

That sentiment is bolstered by the fact that he completely disposed of Appaloosa's position in Sandisk. That stake was 3% of the portfolio at the end of the first quarter, but disappeared in the second-quarter filing.

Both Micron and Sandisk have benefited from growing demand for memory due to the rapid pace of the artificial intelligence data center build-out. Because the supply of memory is limited by foundry capacity (which takes quite some time to increase), prices for their memory chips have soared, creating tremendous profit growth for both companies.

But the memory-chip market is historically cyclical. High demand prompts the leading memory-chip makers to build new production capacity, which usually results in too much new supply hitting the market after a few years. Meanwhile, chip demand has also historically been cyclical, and when a supply glut meets weakening demand, prices fall and profits drop. That's why both of these stocks still trade at relatively low valuations. Even a single-digit earnings multiple can look expensive for these stocks when they are near peak earnings during a boom period.

A bet against one of their biggest customers

Tepper may believe Sandisk and Micron will continue to exhibit strong cyclicity; at the same time, the pressure on pricing from AI demand could negatively impact one of their largest customers. Tepper bought put options on Apple (NASDAQ: AAPL), which uses chips from both companies in its consumer devices for short-term memory and long-term storage.

Tepper's put options give him the right to sell 835,000 shares of Apple worth $242 million at the end of last quarter, just over 3% of Appaloosa's portfolio. That's a big bet against the iPhone maker. During Apple's third-quarter earnings call, outgoing CEO Tim Cook noted that rising memory prices will continue to pressure the company's gross margin in the coming quarters.

Investors have piled into Apple stock amid fears that hyperscalers are overspending on their AI build-outs. The big tech company has chosen not to build a massive data center operation, and thus has kept its capital expenditures far lower than those of the hyperscalers and leading AI labs, yet it has still produced strong earnings recently. That has resulted in considerable cash flow for the business.

As such, investors see it as an alternative to the leading AI stocks. But share price growth has pushed its valuation to 36 times forward earnings, which is quite high for a company that's not growing at the breakneck speed of the chipmakers or hyperscalers.

Tepper may see that valuation as too high for Apple. However, the 13F Form doesn't disclose short positions, so those Apple puts may be just half of a trade that's overall bullish or neutral on the stock.

Tepper's moves make sense in the context of his portfolio. As mentioned, Micron remains a large position in Appaloosa's equity holdings after the strong run-up in share price. Meanwhile, he sees better opportunities as uncertainty about the future of the memory chip industry remains high.

Investors should consider taking gains on Micron and Sandisk at their current prices as well. With regards to Apple, betting against it has rarely worked out for investors. Unless you think you can manage a bearish position on the stock better than Tepper (hint: you can't), I wouldn't buy puts on Apple stock.

Adam Levy has positions in Apple. The Motley Fool has positions in and recommends Apple and Micron Technology. The Motley Fool has a disclosure policy.