David Tepper is one of the most successful investors operating today. His hedge fund, Appaloosa Management, had nearly $6.5 billion in assets under management as of the end of the second quarter. Tepper is known as a contrarian investor, finding deep-value opportunities and taking advantage of situations when stocks are oversold. Generally, he is known as an expert in distressed debt and equity.

That approach has led him to invest in some beaten-down AI stocks. Let’s look at two that made up about 15% of Appaloosa Management’s portfolio as of the end of the second quarter.

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1. Alibaba (12.4% of Appaloosa’s portfolio)

Alibaba Group (BABA +1.69%), the Chinese tech giant, perfectly exemplifies Tepper’s distressed-equity approach.

His fund has owned the out-of-favor Chinese stock since the second quarter of 2022, when the company was reeling as it faced several headwinds. Most notably, Beijing cracked down on Alibaba and its big tech peers after founder Jack Ma made insulting comments to Chinese finance ministers at a conference. That led to the suspension of the initial public offering of Ant Group, Alibaba’s fintech arm, and a $2.8 billion fine against the company following an anti-monopoly probe.

And Jack Ma, who did not hold a day-to-day role with the company but is well known in China, stayed out of the public eye for years, though he has recently returned to the Alibaba campus.

Tepper’s bet on the company has paid off. He began accumulating its shares in the second quarter of 2022. The stock closed that quarter at $113.41, and hedge fund tracker WhaleWisdom estimates that Appaloosa paid an average of $80.87 a share over the time that it bought Alibaba. The stock now trades at $167, meaning that the fund may have earned a return of more than 100%.

Alibaba Group

Today’s Change

(1.69%) $2.79

Current Price

$167.61

In fact, Tepper now seems to be unwinding that bet. Appaloosa sold 2.2 million shares in the second quarter of this year, though Alibaba was still its biggest holding, with a market value of $801.5 million at the end of the quarter, making up 12.4% of its total portfolio.

The Chinese company has jumped in the last few years as the stock benefited from the AI boom, seeing strong growth in its cloud computing unit. Investors responded positively to its investments in AI, including a partnership with Nvidia and plans to invest more than $50 billion in global data centers over the next three years.

Alibaba may be well priced compared to American stocks, but with its overall growth still slow, it doesn’t seem to be the bargain it once was, which could explain why Appaloosa sold off part of its stake in the second quarter.

2. Intel (2.8% of the fund)

Like Alibaba, Intel (INTC 2.97%) is a poster child for deep value in the tech sector. Before a recent surge, the stock had been beaten down after years of struggles, including losing market share to AMD in its core PC business, falling behind in the AI race, and operating a foundry business that continues to lose billions of dollars a year.

The company pushed out former CEO Pat Gelsinger and brought in Lip-Bu Tan, the former CEO of Cadence Design Systems. After several rounds of layoffs, cost cuts, and management changes, the company now appears to be on a stronger footing, and it has certainly helped that it has recently received investments from the U.S. government and Nvidia.

Today’s Change

(-2.97%) $-1.14

Current Price

$37.24

After selling out of Intel in the first quarter of 2025, Appaloosa reopened a position in the second quarter, buying 8 million shares, which were worth $179.2 million at the end of the quarter. The stock traded at an average of $21.25 in the second quarter and has nearly doubled in value to around $40.

Intel is still a high-risk investment as the business struggles to grow, and it’s no longer the deep value it once was when it was trading for half the price. There’s likely to be volatility ahead, but Tepper’s instincts clearly paid off with its recent investment.