David Tepper’s Strategic AI Investments in the Market

David Tepper, who has a net worth of $21.3 billion, stands out in the financial world due to his unconventional investment strategies. Many regard him as one of the finest hedge fund managers of this generation, largely due to his innovative approaches.

A quick glance at Tepper’s Appaloosa Management portfolio reveals a strong interest in artificial intelligence (AI) stocks. Interestingly, Tepper seems to be banking on AI in a distinctive manner compared to many investors today.

Analyzing Tepper’s AI Stock Transactions

Amazon (NASDAQ: AMZN) has been a leader in AI for years, with its Amazon Web Services (AWS) dominating the cloud services sector. The move towards AI continues to drive growth for AWS.

Meta Platforms (NASDAQ: META) is another established name in the AI domain, leveraging AI across its platforms, including Facebook, Instagram, Messenger, and WhatsApp. Additionally, Meta’s Llama large language model (LLM) is among the most potent open-source AI frameworks available.

While both Amazon and Meta remain in Tepper’s top ten holdings, he took steps to decrease his positions in the fourth quarter of 2024. Appaloosa trimmed nearly 19% of its Amazon stake and 21.6% of its Meta shares.

Despite these reductions, it doesn’t indicate a withdrawal from AI investment. In fact, Tepper boosted Appaloosa’s investment in Alibaba Group Holding (NYSE: BABA) by 18.4% during Q4. He also acquired around 3.17 million additional shares of JD.com (NASDAQ: JD), increasing his position in that company by nearly 43.4%.

Unique Perspectives on AI-Linked Stocks

It’s important to note that both Alibaba and JD.com are Chinese firms deeply invested in AI. Tepper’s preference for these companies over U.S. AI stocks reflects a different viewpoint on the market. However, there’s a further intriguing aspect of his strategy.

Tepper substantially increased his holdings in Vistra (NYSE: VST) and NRG Energy (NYSE: NRG) in Q4. He acquired approximately 1.43 million more shares of Vistra, elevating Appaloosa’s stake by 112.5%. Similarly, he expanded Appaloosa’s position in NRG Energy by 81.5%.

Vistra, based in Texas, is a leading integrated power supplier in the U.S., managing fossil-fuel and nuclear plants as well as renewable energy facilities and serving approximately 5 million customers across 18 states.

NRG Energy ranks among the top energy retailers in the U.S., providing services to about 8 million residential customers and 2 million smart home consumers. The company operates across 25 states, the District of Columbia, and parts of Canada, making energy accessible to businesses and households alike.

How do Tepper’s investments in Vistra and NRG Energy relate to AI? Both companies are poised to benefit greatly from the rising demand for energy from data centers, which are essential for AI development.

Vistra recently stated in an investor presentation that energy demand for data centers in the U.S. is expected to increase nearly fourfold by 2030, reaching 55 gigawatts. In its most recent update, NRG Energy emphasized that Texas is the fastest-growing market for power, with data centers as the primary driver of this growth.

Investment Considerations for Vistra and NRG Energy

Tepper’s investments indicate a promising future for AI, albeit through Vistra and NRG Energy. Should investors consider these stocks as well? While mere association with a billionaire investor like Tepper doesn’t guarantee success, Vistra and NRG Energy merit close examination.

Both firms have experienced significant sell-offs this year as the market has corrected. However, this decline has resulted in appealing valuations. Currently, Vistra holds a forward price-to-earnings ratio of 16.3, while NRG Energy trades at 12.8 times forward earnings.

The growth potential for these companies is promising, as the demand for power is likely to rise with the construction of new data centers. While they may not be traditional AI stocks, Tepper’s strategic view highlights a method to capitalize on the AI surge.

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*Stock Advisor returns as of April 1, 2025

John Mackey, former CEO of Whole Foods Market, which is owned by Amazon, serves on The Motley Fool’s board of directors. Randi Zuckerberg, former market development director for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is also a member of The Motley Fool’s board. Keith Speights holds positions in Amazon and Meta Platforms. The Motley Fool has positions in and recommends Amazon and Meta Platforms, along with Alibaba Group and JD.com. The Motley Fool adheres to 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.