Billionaire investor David Tepper has 58% of his portfolio invested in these 7 artificial intelligence (AI) stocks

David Tepper’s Carolina Panthers failed to make the NFL playoffs this year. But Tepper has something else that makes him feel good.

For example, his net worth currently stands at a whopping $20.6 billion. He is considered by many to be the greatest hedge fund manager of the past 40 years.

Tech stocks have been the key to Tepper’s success so far, and that’s unlikely to change. The billionaire currently has nearly 58% of his Appaloosa Management hedge fund invested in just seven artificial intelligence (AI) stocks.

Tepper’s Favorite AI Stocks

Below are the top seven AI stocks in Tepper’s Appaloosa portfolio as of the hedge fund’s latest 13F-HR filing on November 14, 2023.

Data Source: Appaloosa 13F-HR filing.

Five of the so-called “Magnificent Seven” stocks – Meta, Microsoft, Amazon, Nvidia and Alphabet – rank among Tepper’s largest holdings. The only member of the group he doesn’t own is apple and tesla.

Why these 7 AI stocks?

There’s one thing we know for sure. Tepper said he didn’t buy these stocks solely because of the recent generative AI buzz. For example, he has owned Meta stock since 2014 (when it was still known as Facebook). His Appaloosa hedge fund began taking positions in Alphabet the following year.

Perhaps the simplest reason Tepper is investing heavily in these seven stocks is because he likes their growth prospects. AI will certainly play a key role in the future growth of all companies.

Meta is charting a different course than other companies by open sourcing much of its AI efforts. CEO Mark Zuckerberg believes this approach will pay off in the long run. Open sourcing will “increase adoption and create standards across the industry,” he said on the company’s third-quarter earnings call. Zuckerberg believes Meta could ultimately benefit from this.

Microsoft, Amazon, Alphabet, and Alibaba all operate cloud platforms. These companies will experience significant growth as companies move their IT spending to the cloud, primarily for building AI apps.

Nvidia and Advanced Micro Devices (AMD) are the AI ​​equivalent of the gold rush-era scavengers. Nvidia’s graphics processing units (GPUs) are currently the gold standard for powering AI apps, and AMD is similarly vying for market share in the AI ​​chip space. In December, Meta and Microsoft announced plans to use AMD’s latest AI chips, signaling a big opportunity for Nvidia alternatives.

Are Tepper’s top AI stocks a good choice for other investors?

Wall Street is enthusiastic about just one of the top AI stocks in Tepper over the next 12 months. Alibaba’s average price target reflects over 60% upside potential. Analysts are less hopeful about other stocks, at least in the short term.

But I think all seven of these AI stocks could be big winners for long-term investors. Alibaba is rated the most attractive of the group. However, the slowdown in China’s economic growth could lead to further instability.

AI isn’t the only driver of growth for these stocks. Meta and Alphabet could definitely see an increase in advertising revenue from online platforms. Microsoft is a huge player in multiple markets, including productivity software and gaming.

Amazon and Alibaba are e-commerce giants. Nvidia and AMD sell their chips for purposes unrelated to AI.

However, I predict that AI will be the biggest tailwind for all of these stocks, helping to increase Tepper’s net worth to more than $20.6 billion within a few years. I think even non-billionaire investors can make a lot of money with Meta, Microsoft, Amazon, Nvidia, Alphabet, Alibaba, and AMD.