Billionaire David Tepper Is Selling Amazon and Meta Stocks but Betting on Artificial Intelligence (AI) in a Different Way

David Tepper didn't amass a net worth of $21.3 billion by thinking conventionally. He's viewed by some as the greatest hedge fund manager of this generation as a result of his out-of-the-box moves.

If you look at the top holdings in Tepper's Appaloosa Management portfolio, you'll probably quickly see that the billionaire seems to like artificial intelligence (AI) stocks. But he appears to be betting on AI in a different way than most these days.

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AI stocks Tepper is selling and buying

Amazon (NASDAQ: AMZN) has been an AI leader for years. The company's Amazon Web Services (AWS) ranks as the leading cloud services provider. AWS continues to enjoy a strong tailwind from AI.

Meta Platforms (NASDAQ: META) is also a longtime player in the AI world. It incorporates AI extensively throughout its Facebook, Instagram, Messenger, and WhatsApp applications. Meta's Lllama large language model (LLM) is one of the most powerful open-source AI models around.

Both Amazon and Meta are in Tepper's top 10 holdings. However, he reduced Appaloosa's positions in both AI stocks in the fourth quarter of 2024. The hedge fund sold nearly 19% of its stake in Amazon and 21.6% of its shares of Meta.

Those moves don't mean Tepper is throwing in the towel on AI, though. The billionaire investor increased Appaloosa's stake in Alibaba Group Holding (NYSE: BABA) by 18.4% in Q4. He also bought around 3.17 million more shares of JD.com (NASDAQ: JD), raising his hedge fund's position in the company by nearly 43.4%.

The billionaire's most interesting AI angle

You might be aware that both Alibaba and JD.com are Chinese companies that are investing heavily in AI. Tepper seems to find these AI stocks more attractive than their U.S. counterparts. But that's not the most interesting AI angle he has, in my view.

Tepper backed up the truck and loaded up on Vistra (NYSE: VST) and NRG Energy (NYSE: NRG) in Q4. He bought around 1.43 million shares of Vistra, increasing Appaloosa's stake by 112.5%. The hedge fund manager was nearly as bullish about NRG Energy, boosting Appaloosa's position by 81.5%.

Texas-based Vistra is the leading integrated power provider in the U.S. It operates fossil-fuel and nuclear power plants as well as renewable energy facilities. Vistra serves around 5 million customers in 18 states.

NRG Energy is one of the largest energy retailers in the U.S. The company provides energy to roughly 8 million residential customers and has 2 million smart home customers. It also provides energy to businesses. NRG operates in 25 U.S. states, the District of Columbia, and eight Canadian provinces, while its Vivint Smart Home unit is in all 50 U.S. states.

How are Tepper's purchases of Vistra and NRG Energy related to AI? Data centers supporting AI are key growth drivers for both companies.

Vistra highlighted in a recent investor presentation that U.S. energy demand for data centers is projected to nearly quadruple by 2030 to 55 gigawatts. NRG Energy focused on three major points in its latest quarterly update; one of them was that it's beginning to "unlock data center and other upside opportunities." The company said that Texas ranks as the fastest-growing power market in the country, with demand from data centers generating a majority of the projected growth over the next few years.

Should you buy Vistra and NRG Energy, too?

Tepper seems to be betting on the future of AI, albeit indirectly, with his recent buys of Vistra and NRG Energy. Should you buy these two stocks, too? I wouldn't invest in them solely because a billionaire hedge fund manager is doing so. However, I think Vistra and NRG Energy are worthy of serious consideration.

Both stocks have sold off significantly this year as the overall market has pulled back. As a result of these declines, though, their valuations are attractive. Vistra's forward price-to-earnings ratio is 16.3, while NRG Energy trades at 12.8 times forward earnings.

I like the growth prospects for these two companies. The demand for power will almost certainly continue to increase, thanks in large part to the construction of new data centers. I wouldn't go so far as to call Vistra and NRG Energy AI stocks, but I believe Tepper is onto something with viewing these stocks as ancillary ways to profit from the AI boom.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Keith Speights has positions in Amazon and Meta Platforms. The Motley Fool has positions in and recommends Amazon and Meta Platforms. The Motley Fool recommends Alibaba Group and JD.com. The Motley Fool has a disclosure policy.