Billionaire David Tepper Has 16% of His $7.5 Billion Appaloosa Portfolio in Amazon Stock. Is It Still a Buy?

Over a 40+ year career on Wall Street, David Tepper has built a fortune estimated at $23.7 billion, mainly by making aggressive, concentrated wagers. First, he focused on the distressed debt market, building his Appaloosa Management into one of the largest and most successful hedge funds and earning him billions in the process.

Now, Appaloosa primarily manages Tepper's personal fortune. Instead of distressed debt, Tepper now mainly invests in large-cap tech stocks, most notably Amazon (NASDAQ: AMZN). According to Appaloosa's latest 13-F filing with the Securities and Exchange Commission (SEC), Tepper has around 16% of his nearly $7.5 billion stock portfolio invested in this "Magnificent Seven" stock.

Tepper puts in more money as Amazon climbs on AI growth

During the quarter ending June 30, Tepper's Appaloosa increased its position in Amazon by 680,000 shares, or just under 15.8%. During this same time frame, Appaloosa reduced its Micron position by 41.4% and exited its Sandisk position entirely. The fund also increased its positions in Alphabet and Meta Platforms by 6.7% and 54.6%, respectively.

This strongly suggests a cycling out of "pick-and-shovel" artificial intelligence (AI) plays, into hyperscaler stocks. Tepper's fund may have made an aggressive pivot toward Facebook and Instagram parent Meta Platforms, but given that Meta accounts for only 5.1% of the overall portfolio, Amazon seems to remain the investor's highest-conviction bet on the AI growth trend.

Since the end of Q2, Amazon shares have continued to climb, most notably following the company's latest quarterly earnings report on July 30.

The market reacted bullishly to better-than-expected revenue growth numbers for Amazon Web Services (AWS), the company's cloud computing unit. Thanks to the AI infrastructure boom, AWS reported 37% revenue growth in the quarter, handily beating forecasts. Because of the strong growth, investors also reacted positively to CEO Andy Jassy's announcement that Amazon would increase its 2026 capital expenditure budget from $200 billion to $220 billion.

The best move for investors

While Tepper was still increasing Appaloosa's Amazon stake during Q2, it's unclear whether he's buying or selling right now since an SEC filing isn't due until the quarter is over. However, there's more to the bull case than "David Tepper likely still owns it." Buying Amazon represents a big bet on the continuation of the AI infrastructure build-out.

Based on last quarter's results, Amazon's heavy infrastructure investments are producing tangible growth. At 22 times earnings estimates, Amazon stock trades at a slight premium to its "Magnificent Seven" peers . For instance, Alphabet, Meta, and Microsoft currently trade at forward earnings multiples in the high-teens and low-20s.

However, a continued AI-driven growth resurgence for AWS could really pay off for investors who stay bullish. First, shares could keep rising in tandem with further earnings growth. Second, if strong results from Amazon, as well as other hyperscalers, emerge, AI stocks could surge, on the results themselves as well as due to improved sentiment for the sector.

That said, be mindful of the potential impact on shares of the AI bubble bursting. With the company's minority stake in AI start-up Anthropic further exposing it to the AI trend, this stock could get hammered back.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Micron Technology, and Microsoft. The Motley Fool has a disclosure policy.