Key Points
Tepper is taking gains on some of the biggest winners in his portfolio.
This chipmaker has a broad portfolio across multiple segments that could all benefit from the rising use of large language models.
The stock trades at a very low valuation relative to other AI chipmakers.
Billionaire David Tepper loves a good turnaround story. He made his fortune as a master of investing in distressed debt through his hedge fund, Appaloosa Management. The value-focused contrarian approach Tepper takes with his investments has continued to serve him well as he expanded it to equities.
True to form, the fund’s most recent 13F filing with the SEC showed significant sales of stocks that have seen their share prices soar. These stocks, which have largely capitalized on the artificial intelligence (AI) trend, include Micron Technology (NASDAQ: MU), Oracle (NYSE: ORCL), and Intel (NASDAQ: INTC).
With the profits, Tepper reinvested in another AI stock that hasn’t quite taken off yet, but that could become a key supplier of AI chips across various form factors over the next few years. While its stock is up 31,000% from its initial public offering (IPO) in the early ’90s, it’s traded sideways for the last two years. Here’s what may have pushed Tepper to make the shift in his portfolio.
Image source: Getty Images.
Taking some big wins
Tepper likely made a significant gain on his Intel purchase in just a few months. Its assets may have looked undervalued in the second quarter. Despite soaring semiconductor demand, Intel had seen its stock fall, as it struggled to attract customers to its foundry business and produce compelling technological gains. Tepper’s purchase came as the stock had fallen considerably from its late 2023 and early 2024 high price.
In August, however, the U.S. government announced the purchase of a stake in Intel, sending the share price higher. With government backing, Intel looked to be on solid footing, and it may have a longer runway to find a significant customer for its next-gen semiconductor manufacturing process. The stock instantly spiked, and Tepper was smart to take gains. That said, the stock has continued climbing in 2026. It’s now back near its 2023 high. At its current valuation and with significant uncertainty, it looks like a stock to avoid.
Likewise, Tepper started investing in Oracle in late 2023, perhaps seeing an underappreciated AI infrastructure company. While the stock made steady gains through 2024, leading him to take a large portion of his investment off the table in early 2025, the stock skyrocketed higher in the second and third quarters last year.
Strong earnings results and momentum in its cloud infrastructure business drove the stock higher. A $300 billion contract with OpenAI pushed the company’s value toward $1 trillion in the third quarter, which may have been the catalyst for Tepper to sell the last of his shares. The investor excitement quickly wore off, however, as the reality of Oracle’s current balance sheet makes its AI data center build-out relatively risky. It’s closely tied to OpenAI’s success and its ability to pay for compute, as it takes on significant debt to build the infrastructure it needs.
Micron has been a longtime holding for Tepper. At one point during the semiconductor shortage of 2020 and 2021, the stock accounted for roughly 10% of his portfolio. After Appaloosa trimmed the position, it accounted for just over 1% of the fund’s equities as of the end of the third quarter.
The company pre-announced third-quarter earnings, demonstrating considerable pricing power for its memory chips, a crucial component of GPUs. The news sent the stock higher and likely pushed Tepper to take some more gains off the table. The stock has continued to run higher amid the NAND chip shortage and industrywide hesitancy to build out capacity. However, the cyclical stock could face a severe downturn in profitability over time as supply of its commodity-like product moves in line with demand. As such, it makes sense for Tepper to slowly take some of the stock off the table.
The next AI chipmaker Tepper finds intriguing
One of Tepper’s biggest tech stock purchases in the third quarter isn’t a chipmaker most typically think of when they think of artificial intelligence. But that may be exactly what attracted Tepper to the company in the first place. Qualcomm (NASDAQ: QCOM) is quietly well-positioned to capitalize on the proliferation of artificial intelligence.
While it’s primarily known for its wireless connectivity patents and baseband chipsets, which are found in almost every smartphone in the world, Qualcomm also has a growing business of other chip designs.
Most prominently, its high-end Snapdragon processors can be found in many Android devices. It also makes chips for automotive connectivity and processing, as well as a burgeoning PC business. In October, the company announced a new set of AI chips to be released in 2026 and 2027, designed specifically for large language model inference.
Qualcomm’s non-baseband chip sales could grow quickly as companies develop more use cases for AI and build smaller language models that can run on devices rather than in massive data centers. The latter, on-device AI, could spark demand for more high-end smartphones, pushing device makers to use Snapdragon processors. Meanwhile, Qualcomm’s AI200 and AI250 rack-level AI inference solutions could provide more cost-effective solutions at the data center level.
Qualcomm’s position in the automotive industry could also get a boost as more advanced AI features are introduced in cars. It’s already growing fast, with segment revenue climbing 36% in 2025, but it’s playing the role of the incumbent in that industry, as other chipmakers look to take market share as computing needs for cars advance.
While Qualcomm is losing a major baseband chip customer over the next few years, the strength of the rest of its business and the tailwind of AI should enable it to produce steady revenue growth. And once that headwind is behind it, it could see revenue growth and profits accelerate. With the stock trading at a forward P/E of just 13, the shares look very inexpensive, making it a smart way to play the growing use of artificial intelligence across the cloud and personal devices.
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Adam Levy has positions in Qualcomm. The Motley Fool has positions in and recommends Intel, Micron Technology, Oracle, and Qualcomm. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
