Billionaire investor David Tepper, who manages the global hedge fund Appaloosa Management, has significantly increased his stake in Nvidia, a leading graphics chipmaker. According to a recent 13F filing with the U.S. Securities and Exchange Commission, Tepper's stake in Nvidia has grown by a staggering 580%. This move has positioned Nvidia as one of the largest holdings in Appaloosa's portfolio, rivaling Meta Platforms for the top spot.
Initial Investment in Nvidia
Tepper's interest in Nvidia began in the first quarter of 2023 when he acquired 150,000 shares for Appaloosa's portfolio, valued at nearly $41.7 million at the end of Q1. The recent filing indicates that during the second quarter, Tepper purchased an additional 870,000 shares, bringing Appaloosa's total holdings to 1.02 million shares, valued at over $450 million.
The decision to invest heavily in Nvidia may be attributed to the vast potential of artificial intelligence (AI). Generative AI applications, in particular, have garnered significant attention in the tech industry. McKinsey estimates that generative AI could potentially increase global corporate profits by up to $4.4 trillion annually. Nvidia's graphics processing units (GPUs) are recognized as the industry standard for powering AI applications. The demand for Nvidia's GPUs is so high that it's outstripping supply, with companies like Tesla expressing interest in acquiring as many chips as Nvidia can produce.
Appaloosa's Other Investments
In addition to Nvidia, Tepper's Appaloosa LP disclosed new positions in Advanced Micro Devices Inc. (AMD) and Apple Inc. in a recent Securities and Exchange Commission filing. The hedge fund reported a 2.3 million-share position in AMD and a 480,000-share position in Apple. Interestingly, Appaloosa also divested its position in Tesla Inc., which it had acquired just a quarter ago.
Nvidia Valuation Concerns
Despite the bullish stance on Nvidia, there are concerns about the company's valuation. While Nvidia is expected to witness substantial revenue growth due to the high demand for its chips, its shares are currently trading at 18 times next year's sales. Recent analyses have unveiled that Nvidia is securing nearly a 1,000% profit on every H100 Tensor Core GPU it sells. The H100 Tensor Core GPU, often referred to as the “Hopper” AI Accelerator, is a cutting-edge GPU designed for high-performance computing, particularly in the realm of artificial intelligence. Valuation expert Aswath Damodaran has estimated a fair value for Nvidia's stock at around $240 per share, which is approximately 45% below its current trading price.