Billionaire David Tepper Dumped Sandisk for This Trillion-Dollar AI Chip Giant

Sandisk (NASDAQ: SNDK) has been one of the most spectacular stories of the year as the memory crunch creates staggering demand for its products. However, the market seems to have moved on; although Sandisk stock has gained 1,230% over the past year, it's down 27% from its 52-week high.

Billionaire investor David Tepper, who runs hedge fund Appaloosa Management, has moved on, too. He completely closed out his $179 million position in the second quarter and, at the same time, opened a new position in trillion-dollar chip giant Broadcom (NASDAQ: AVGO). Should you follow suit?

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Where Sandisk is going

Sandisk is one of the few companies that produce the memory products necessary for artificial intelligence (AI) development. It offers a range of products, but its NAND flash memory, which can retain data in an off state, is critical to the process. The company says it's the "most scalable semiconductor technology in the world" and "a critical component of AI architecture." Demand has soared, and Sandisk's business is booming.

In the fiscal 2026 fourth quarter (ended July 3), revenue increased 372% over last year, and gross margin widened from 26.4% to 84.6%.

Although the stock doesn't look the least bit expensive, trading at 23 times trailing-12-month earnings, the market is already concerned that a cycle could be ending soon as well as the company's ability to maintain triple-digit sales growth. To that end, Sandisk has changed its model to what it calls its new business model (NBM), which comprises multiyear agreements that lock in long-term revenue streams. However, the hype is fading, and it looks like Tepper is pocketing his gains.

Where Broadcom is going

Broadcom isn't growing nearly as fast as Sandisk; it's much more expensive, trading at 46 times trailing-12-month earnings, and it's up only 7% over the past year. But Tepper traded Sandisk in for it anyway.

This could be precisely because the stock hasn't moved much. Buying the stock while it's down offers the greatest opportunity for gains, and Broadcom has become much cheaper over the past year.

He also likely sees a massive opportunity. Broadcom is a major player in AI chips, and it's growing fast. Revenue increased 86% year over year in the 2026 fiscal third quarter (ended Aug. 2), and AI semiconductor revenue increased 221%. Management raised full-year guidance for AI revenue from $56 billion to $58 billion and expects $115 billion in 2027, followed by $230 billion in 2028.

Keep in mind that hedge fund managers may have different goals than individual investors, but in this case, Broadcom stock looks like an excellent AI play for retail investors to follow.

Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Broadcom. The Motley Fool has a disclosure policy.