Billionaire David Tepper of Appaloosa Just Sold 5 Prominent Artificial Intelligence (AI) Stocks

Wall Street runs on information, and investors rarely have to look too far for market-moving data. Everything from President Donald Trump's ever-changing tariff and trade policy to earnings season provides clues to investors about the current and future health of corporate America and the U.S. economy.

But one of the most-telling of all data releases occurred roughly two weeks ago, on May 15. This was the deadline for institutional investors overseeing at least $100 million to file Form 13F with the Securities and Exchange Commission. Quarterly filed 13Fs detail which stocks, exchange-traded funds, and (select) options Wall Street's top-tier money managers have been buying and selling.

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Though Warren Buffett is the most well-known of all asset managers, he's far from the only billionaire investor known for their outsized returns or keen stock market insight. Another billionaire fund manager that's proven their chops on the investing front is David Tepper of Appaloosa Management.

Image source: Getty Images.

As of the end of March, Tepper was overseeing close to $8.4 billion in assets under management, which does account for a small number of options contracts. But the detail that stands out most about Tepper's first-quarter trading activity was his net-selling of artificial intelligence (AI) stocks.

David Tepper's Appaloosa was a big-time seller of AI stocks

To be objective, Appaloosa's billionaire chief did do some buying in the AI space. He opened a new position totaling 130,000 shares in AI-networking specialist Broadcom, as well as added 60,000 shares of social media giant Meta Platforms and 20,000 shares of world-leading chip fabricator Taiwan Semiconductor Manufacturing to existing positions during the first quarter.

But there's a night-and-day difference between the amount of selling Tepper undertook in the AI arena, relative to buying.

Based on Appaloosa's 13F, Tepper sold shares of five prominent artificial intelligence stocks in the March-ended quarter:

• Advanced Micro Devices (NASDAQ: AMD): 1,200,000 shares sold (exited position)
• Intel (NASDAQ: INTC): 1,000,000 shares sold (exited position)
• Lam Research (NASDAQ: LRCX): 750,000 shares sold (60% reduction)
• Nvidia (NASDAQ: NVDA): 380,001 shares sold (56% reduction)
• Microsoft (NASDAQ: MSFT): 460,000 shares sold (47% reduction)

It's quite possible this selling activity represents nothing more than simple profit-taking. Excluding Intel, whose stock has underperformed in a big way, shares of Nvidia, Microsoft, AMD, and Lam Research have all rocketed higher as the AI revolution has taken shape. With Tepper's Appaloosa averaging a holding period of around 29 months, he's proven a willingness to ring the register when his positions are in the green.

The worry is that there may be more than just benign profit-taking and/or stop losses (in Intel's case) behind Tepper's aggressive net selling of AI stocks.

Image source: Getty Images.

Tepper's selling of brand-name AI stocks may signal bigger issues

On one hand, demand for AI-graphics processing units (GPUs) and AI solutions has been exceptionally strong. Nvidia's Hopper (H100) and Blackwell GPUs hold a seemingly insurmountable market share lead in AI-accelerated data centers, with AMD in the process of ramping up production of its Instinct AI-accelerating chips. Intel's central processing units (CPUs) are also playing a role in the rapid expansion of AI-data center infrastructure.

While these three companies would appear well-positioned to benefit from the ongoing build-out of enterprise data centers, the economics of supply and demand might disagree.

For Nvidia, nothing has been more important to its rapid sales and profit growth than AI-GPU scarcity. Demand overwhelming the supply of GPUs has allows Nvidia to place a huge premium on Hopper and Blackwell GPUs. But with AMD and other direct competitors ramping their production, and many of Nvidia's largest customers by net sales internally developing AI chips to use in their data centers, AI-GPU scarcity should meaningfully wane in the coming quarters.

This is expected to weigh on Nvidia's pricing power, as well as AMD and possibly even Intel. It also has the potential to adversely impact the pricing power for semiconductor equipment companies like Lam Research, whose equipment plays an important role in packaging the high-bandwidth memory needed in AI-accelerated data centers.

The other potential gray cloud for AI stocks that may have encouraged billionaire David Tepper to notably pare down Appaloosa's holdings in this hot trend is the role history has played for next-big-thing technologies and innovations.

Since (and including) the advent of the internet in the mid-1990s, every next-big-thing trend has navigated its way through a bubble-bursting event early in its expansion phase. These bubbles form because investors consistently overestimate how quickly a new technology or innovation will gain utility and/or widespread adoption.

Even with strong demand for AI hardware, as evidenced by Nvidia's rapid sales growth, most businesses deploying AI solutions haven't yet figured out how to optimize those solutions and/or generate a profit on their AI investments. Every game-changing technology needs time to mature, and AI isn't anywhere close to having reached the point of maturity.

If the AI bubble were to burst, we'd see widespread weakness among the five prominent AI stocks Tepper completely exited or reduced in the March-ended quarter. Presumably, no company would be hit harder than Nvidia, which generated more than 90% of its net sales from its data center segment in the fiscal fourth quarter (ended late January).

But even Microsoft wouldn't be immune. Though its high-margin software sales with Office and Windows would help insulate the stock from significant downside, growth for its high-margin cloud infrastructure service platform Azure, which incorporates generative AI solutions, would likely slow during an AI bubble-bursting event.

With history being undefeated for more than three decades, billionaire David Tepper may be allowing these odds to partially guide his investment strategy.

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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. Sean Williams has positions in Intel and Meta Platforms. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, Lam Research, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short May 2025 $30 calls on Intel. The Motley Fool has a disclosure policy.