Appaloosa Management, led by billionaire investor David Tepper, has sold its entire holding in Advanced Micro Devices (AMD). The move appears to follow a gradual reduction of AMD shares that began in late 2024. After a small purchase in Q4 2024, Appaloosa steadily cut its AMD position until exiting completely earlier this year.
Analysts note that AMD faces a challenging environment. Its two main business lines have seen slower growth. Although AMD’s data center GPU efforts have shown promise, they still lag behind rival Nvidia. Both firms plan to launch new chipsets in the latter half of 2025 and in 2026, but Nvidia’s commanding lead in data center chips remains a significant hurdle for AMD.
Reasons Behind Selling AMD
Several factors likely influenced Appaloosa’s decision to sell AMD:
Slowing Growth: AMD’s core businesses have decelerated for several quarters.
Competitive Pressure: Nvidia dominates the data center GPU market. AMD must narrow that gap.
Uncertain Outlook: Despite upcoming product releases, AMD’s future growth remains unclear.
By exiting AMD, Appaloosa has freed capital for other opportunities. Tepper may have concluded that the risks in AMD outweigh the potential rewards at this time.
Appaloosa Begins Buying Broadcom
In place of AMD, Appaloosa has initiated a position in Broadcom Inc. (NASDAQ: AVGO). The firm disclosed this new stake in its latest 13F filing with the Securities and Exchange Commission (SEC).
Broadcom stands out for its diversified business model. It operates 26 different units, with a strong emphasis on networking solutions for AI data centers and custom chips. This wide range of products helps shield Broadcom from overreliance on any single market segment.
Why Broadcom Appeals to Tepper
Several key reasons support Appaloosa’s decision to buy Broadcom:
Diversification: Broadcom’s varied lines include AI networking equipment and semiconductors for multiple industries.
Share Buyback Program: Broadcom’s board recently approved a $10 billion share repurchase. Such a move often signals management’s confidence in the stock’s valuation and the company’s growth prospects.
VMware Acquisition Benefits: Broadcom is still unlocking value from its purchase of VMware, especially in software and infrastructure solutions for enterprises.
AI Infrastructure Tailwinds: As businesses increase spending on AI, Broadcom is well positioned to benefit. Its products serve the growing demands of AI data centers and related markets.
Overall, the firm’s expanding markets and strategic acquisitions suggest a strong long-term growth outlook.
Valuation and Timing Considerations
Broadcom trades at approximately 36.4 times forward earnings, which is not inexpensive. However, Appaloosa capitalized on a dip in Broadcom’s share price during the first quarter of 2025. Buying during a temporary pullback can be a smart tactic for long-term investors.
That said, market timing is notoriously difficult. Long-term investors often emphasize the importance of staying invested over trying to buy at the absolute lowest price. Given the multi-year tailwinds in AI capital spending, many analysts believe Broadcom’s growth runway remains intact.
Should You Invest $1,000 in Broadcom Today?
While Appaloosa’s move offers valuable insight, it is not a recommendation to buy Broacdom outright. Investors should consider all factors, including risk tolerance, portfolio diversification, and investment horizon.
Notably, a team of Motley Fool Stock Advisor analysts recently highlighted their top ten stock picks, but Broadcom did not appear on that list. Their historical returns have been strong—averaging 994% total return compared to the S&P 500’s 172% over the same period. However, investors should weigh multiple viewpoints before making a decision.
In summary, Broadcom’s diversified business, share repurchase program, and AI growth prospects make it an attractive candidate. Yet each investor must decide whether spending $1,000 on Broadcom aligns with their own financial goals and risk profile.
