Billionaire David Tepper's Biggest Artificial Intelligence (AI) Bet (Hint: It's Not Nvidia)

Billionaire David Tepper's Appaloosa Management, while significantly increasing its Nvidia stake in Q2 2025, maintains Alibaba Group Holding (BABA) as its largest AI investment and top overall holding, representing 12.4% of the portfolio. Tepper's conviction in Chinese stocks, particularly Alibaba's strong triple-digit AI-related product revenue growth and 26% YoY Cloud Intelligence Group revenue increase, underpins this position. Despite this, Appaloosa trimmed its Alibaba stake by 23% in Q2, likely profit-taking after the stock's substantial 2025 rally, even as its AI segments continue to show robust expansion.

Analysis

Billionaire David Tepper's Appaloosa Management significantly increased its Nvidia (NVDA) stake by 483% in Q2 2025, yet Alibaba Group Holding (BABA) remains his largest AI investment and top overall holding, comprising 12.4% of his portfolio. This positioning highlights a strategic allocation across both established and emerging market AI leaders. Appaloosa's top 10 holdings are heavily skewed towards AI, including hyperscalers like Amazon and Alphabet, alongside Meta and Uber.

Tepper's initial rationale for Alibaba stemmed from attractive valuations and growth prospects following China's economic stimulus in September 2024. While BABA's stock more than doubled in 2025, pushing its forward P/E to 23.3 from below 10, its Q2 2025 revenue growth was a modest 2% year-over-year. However, the company's AI-related product revenue has shown triple-digit growth for eight consecutive quarters, and its Cloud Intelligence Group revenue jumped 26% year-over-year, indicating strong underlying AI segment performance.

Despite Alibaba's AI segment strength, Tepper reduced his BABA stake by approximately 23% in Q2 2025, selling over 2 million shares. This move is interpreted as profit-taking after the stock's substantial rally, rather than a fundamental shift in long-term conviction, especially given the stock's continued gains post-Q2. The mixed signals from overall revenue growth versus robust AI segment expansion, coupled with potential Chinese government intervention risks, suggest a nuanced outlook for BABA.

Key Decisions for Investors

• Investors should scrutinize Alibaba's overall 2% Q2 2025 revenue growth against its strong underlying AI-related product revenue, which has seen triple-digit growth for eight consecutive quarters, indicating a divergence in business segment performance.
• Given Tepper's profit-taking and the stock's significant rally, investors should re-evaluate Alibaba's current valuation (forward P/E 23.3) while considering the long-term potential of its robust Cloud Intelligence Group and AI initiatives.
• Maintain awareness of potential geopolitical and regulatory risks from the Chinese government, which could introduce volatility to Alibaba's stock regardless of its fundamental AI progress.