David Tepper Sold 41% of His Micron Shares and It Is Still His Second-Biggest Holding

David Tepper's hedge fund, Appaloosa Management, sold 690,000 shares of Micron Technology (NASDAQ:MU) during the second quarter, cutting its stake in the memory specialist by 41%, according to the fund's latest 13F filing. On its own, that looks like a manager heading for the exit.

But the same filing shows the opposite. The stake Appaloosa kept was worth about $1.13 billion at the end of June -- about 15% of the fund's equity portfolio, and its second-biggest position, behind only a $1.19 billion Amazon stake.

Micron stock gained about 242% during the quarter, which is how both things can be true at once.

What is a manager doing, then, when he sells that much of a stock and ends up more concentrated in it? I'd argue the size of what he kept is the more telling number. And what it reflects is Micron -- the cycle, and the earnings underneath it.

Image source: Getty Images.

Selling didn't shrink the bet

At the end of March, Appaloosa held 1.665 million Micron shares worth about $563 million. By the end of June, the 975,000 remaining shares were worth about $1.13 billion, in a portfolio totaling about $7.7 billion. Not only was the trimmed position worth twice what the bigger one had been in March, but it also took up more of the fund (nearly 15% of the portfolio, up from about 9.5%).

The stock did that work. After all, Micron climbed from about $338 at the end of March to about $1,154 at the end of June. Had Appaloosa sold nothing, Micron would have grown to more than a fifth of the fund.

In other words, the sale didn't so much shrink the bet as keep it from getting even bigger.

Is Tepper getting out of memory?

A 13F deserves one caveat, though. It is a snapshot of a single day (June 30, in this case), filed 45 days after the fact, and it says nothing about what a fund has done since.

Since then, Micron stock has pulled back to around $1,000 as of this writing, about 14% below where it ended the quarter.

And Appaloosa reportedly kept moving. In August, CNBC reported, citing a person familiar with the matter, that the fund had bought a bigger position in memory stocks since the quarter ended than it sold during it. The buying came as the group slumped.

The same filing also showed Appaloosa selling out of Sandisk (NASDAQ:SNDK), its smaller memory position. But set beside the buying reported since, even that exit arguably looks like profit-taking after a huge run.

The boom doesn't erase the cycle

Why leave 15% of a fund in one memory stock? Because the earnings have become enormous.

In the fiscal third quarter of 2026 (the period ended May 28, 2026), Micron's revenue reached $41.5 billion, more than quadruple the year-ago period's $9.3 billion. That was up from $23.9 billion just one quarter earlier, too. Net income came in at $28.2 billion, up about 15-fold year over year. And management guided the fiscal fourth quarter, which ended this week, to about $50 billion of revenue at a gross margin of about 86%.

Demand from artificial intelligence data centers is doing most of the work. Micron's cloud memory unit alone produced $13.8 billion of fiscal Q3 revenue, about four times its year-ago total.

Also worth noting: the guided step up in revenue, about $8.5 billion, would be smaller than either of the last two sequential jumps. And that is with an extra, 14th week in the quarter. Put another way, the growth is decelerating.

Of course, memory has always moved in cycles, and the down half is brutal. Three years ago, in fiscal 2023, Micron lost $5.8 billion as revenue roughly halved.

Investors haven't forgotten. Micron trades at about 6.5 times expected earnings for its next fiscal year -- and a price-to-earnings multiple that low, on earnings still climbing, usually means the market expects those earnings to fall.

Ultimately, I see the same opinion in Tepper's positioning and in Micron's valuation. The profits are enormous. How long they last is the question.

My own stance lands close to his. I view Micron stock as a hold here. I wouldn't sell a business earning like this, but this deep into the cycle's good half, I wouldn't put new money in at today's price either. And this cyclicality is risky. So keep that in mind.

Sure, holding without adding could mean missing more upside if this boom is still in its early innings. I'm comfortable with that.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Micron Technology. The Motley Fool has a disclosure policy.