David Tepper has trimmed his Nvidia stake which looks to be some profit-taking at first glance but we’re not so sure. Dig deeper, and you’ll find breadcrumbs that suggest this move may be more than routine rebalancing.
Beneath the headlines one pattern stands out like a sore thumb, David Tepper keeps dumping Nvidia, but why?
Key Points
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Billionaire Tepper may be anticipating a peak in AI euphoria and positioning ahead of a potential shift in sentiment.
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Tepper’s move mirrors past tech bubbles where hype outpaced reality, and corrections followed.
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Tepper’s buy of Broadcom offers diversification, rising margins, and better valuation. It’s a defensive pivot that still plays the AI theme, but with far less downside risk than Nvidia.
A Heavy Selloff Is Unfolding
Just a year and change ago, Tepper’s Appaloosa Management held over 4 million shares of Nvidia. Fast forward to the latest filing, and that stake has been chopped down to under 400,000 shares. That’s not a trim. That’s an exit in slow motion.
So, what’s the logic? Sure, Nvidia’s been a home run since the start of the AI arms race. But Tepper isn’t a momentum chaser, he’s a macro tactician with an uncanny ability to sense when the narrative is overheating.
And right now, the signs point to growing friction beneath Nvidia’s seemingly unstoppable ascent.
AI Bubble Set To Burst?
Tepper may also be playing the long game, wary of how early-stage tech hype cycles tend to end. From dot-com stocks in the 90s to blockchain plays in 2017, every transformative tech trend has ridden a wave of euphoria, right before the bubble bursts.
Is AI any different? Most enterprises still lack a scalable AI roadmap, and many are only now confronting the cost bloat and integration complexity that come with these systems. That’s a classic setup for a correction.
And if AI sentiment turns, Nvidia, arguably the most visible face of this movement, could find itself squarely in the blast radius.
Tepper’s Rotation into Broadcom Speaks Volumes
Interestingly, Tepper wasn’t just selling in Q1, but he was reallocating. One of the most telling buys? Broadcom. Appaloosa picked up 130,000 shares of the AI networking juggernaut.
Why Broadcom? Broadcom’s appeal extends far beyond AI. It’s a diversified powerhouse with deep moats in smartphone components, especially post-5G rollout, industrial automation, cybersecurity, automotive networking, and even medical systems. This isn’t a one-trick pony.
Another subtle edge is Broadcom’s gross margins are moving in the opposite direction of Nvidia’s, up, not down. That trend alone can signal healthier long-term earnings momentum, especially in a rising-rate environment where margin stability is at a premium.
And let’s not ignore timing. Broadcom’s stock pulled back earlier this year, giving Tepper a chance to buy in near 23x forward earnings, well below its historical average and the lowest in two years.
What Traders Should Watch Next
Here’s what smart traders are likely keeping an eye on:
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Nvidia’s Q2 margins – If gross margin compresses, expect downward pressure on the share price and possibly a sentiment shift.
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Customer capex disclosures – If more hyperscalers tout proprietary chip development, it’ll reinforce the case for internal substitution.
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AI spending normalization – Broadcom’s diversified exposure offers insulation, while Nvidia remains tightly tied to AI’s short-cycle spending curve.
It seems now that the smart money is preparing for a phase shift in the AI narrative. Traders would be wise to consider whether Nvidia’s golden era is peaking, or whether the risk/reward profile is starting to tilt in the other direction.