Hedge fund money manager David Tepper trades Nvidia for Broadcom
Artificial intelligence (AI) is attracting a tidal wave of capital from big investors — from billionaire hedge-fund managers to pension funds as well as global institutions.
Earlier this year, hedge fund manager and founder of Appaloosa Management, David Tepper, hammered home the importance of AI when his firm’s Form 13F were made public. As required by the U.S. regulator, the Securities and Exchange Commission (SEC), a Form 13F must be filed by all institutional investors with at least US$100 million (C$140 million) in assets under management (AUM). The deadline to submit these forms is mid-May and soon after everyday investors scour the submissions for a glimpse at where the big money is flowing.
This year, Tepper’s name stood out — not because of his firm’s impressive track record but because of where his firm was focusing their investments. As a top money manager who oversees more than US$8.3 billion (C$11.6 billion) in AUM, Tepper and his team chose to sell more than half of his firm’s shares of tech-darling, NVIDIA (NASDAQ:NVDA), and load up on another leading AI stock.
Now everyday investors need to ask: should I do the same?
A decade ago, AI was considered an experimental corner of the tech sector. Today, it’s a core pillar of everything from energy and health care to finance and national security.
Global AI software spending is expected to hit US$307 billion (C$429 billion) in 2027, up from about US$184 billion (C$257 billion) in 2024, according to IDC (1). As Microsoft (NASDAQ:MSFT) CEO Satya Nadella explained his 2023 letter to shareholders (2): AI is “the next major platform shift,” that will “reshape every software category, every business, every industry.”
For large institutional investors, that kind of structural change is impossible to ignore. And it’s why Tepper and other top money managers are rebalancing their portfolios and allocating more resources to investing in AI.
According to SEC regulatory forms, Tepper’s firm held 4.42 million Nvidia stock after Nvidia’s historic 10-for-1 stock split in June 2024. Yet, in the first quarter of 2025, Tepper’s firm sold 56% of their Nvidia shares. This sell-off could have been taken as a retreat from AI. It was not. Instead, the Appaloosa team loaded up on other market-leading AI stock, such as AI-networking specialist Broadcom (NASDAQ:AVGO).
Tepper’s move is part of a larger story, where major investors aren’t exiting AI but, rather, rotating among AI leaders as the ecosystem matures.
For everyday investors, this doesn’t mean that any and all AI stock will generate triple-digit returns. What is means is that AI is inevitable, but choosing the right companies at the right time is the real challenge — and opportunity.
The economic payoff expected from AI is one of the main drivers behind large investor interest.
Economic impact: McKinsey forecasts that AI could contribute US$17.1 trillion (C$23.9 trillion) annually to the global economy by 2030 (3).
Corporate adoption: A 2025 PwC survey found that 73% of CEOs globally say AI will “significantly change” how they operate in the next three years (4).
As a result, many investors, including top money managers, are targeting sectors positioned to capture the use and value of AI. For instance: chipmakers, cloud computing giants, cybersecurity, enterprise software and telecom companies responsible for handling exploding data demand.
Even though some investors have trimmed Nvidia holdings — as shown in Tepper’s 2025 filing — demand for AI hardware remains enormous. Nvidia still holds about 85% to 90% market share in AI accelerator chips (5).
Meanwhile, companies like Broadcom (NASDAQ:AVGO), AMD (NASDAQ:AMD), and Alphabet (NASDAQ:GOOG)continue to invest heavily in AI data-centre growth. As Broadcom CEO Hock Tan said in December 2024 (6): “AI is driving unprecedented demand for our networking and accelerator portfolio.” This infrastructure build-out is long-term in nature, creating a multi-year earnings runway — exactly the type of opportunity large institutions prefer for large-dollar investments (and a signal for mainstreet investors to pay attention).
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For the broader market, AI has shifted from a high-risk emerging technology to one of the most reliable and outsized generators of corporate earnings growth. In practical terms, this means AI-exposed companies are no longer acting like a narrow tech niche — they’re pulling up entire indices, shaping capital flows and influencing how portfolio managers allocate risk.
In fact, earnings from AI-driven companies are so strong it’s changed how analysts model long-term valuations. In the S&P 500, for example, more than 60% of total earnings growth in 2024 came from companies tied directly to AI infrastructure, cloud computing, advanced chips or automation.
When a single thematic driver delivers the majority of market growth, it becomes impossible for large funds to stay underweight. And this helps feed and reinforce the investment cycle. As strong AI-driven earnings attract more institutional capital that capital increases liquidity and stabilizes valuations. Those stable valuations encourage even more long-term investment and the result is that the AI sector behaves less like a speculative investment and more like the new backbone of global equity performance.
For big investors, the takeaway is simple: AI is no longer optional exposure. Its return profile is driving index performance, shaping sector leadership and redefining how equity markets generate growth. Funds that fail to participate risk lagging benchmarks for years, which is why institutional money continues to move decisively into the AI ecosystem.
And the solutions offered by AI go beyond what is found on the computer screen or on the factory floor. Worldwide, demographics are becoming one of the biggest economic headwinds. In Canada, for example, the working-age population is growing at its slowest pace since the early 1960s and this prevents businesses from growing and adding to the nation’s Gross Domestic Product (GDP), which is the total monetary value of all finished goods and services produced within a country’s borders in a given year. As a result, businesses need to automate in order to maintain productivity — and more often than not AI helps bridge that gap.
“AI is going to replace a lot of jobs, but more importantly, augment and improve productivity in ways we haven’t seen in decades,” explained BlackRock (NYSE:BLK) CEO Larry Fink in a shareholder letter (7).
It’s also why institutional investors, like Tepper, view AI as a multi-trillion-dollar solution to a structural economic challenge.
To capture the quickly-evolving AI market, institutional investors are no longer focusing on chipmakers, but spreading investments across a variety of verticals, including:
AI infrastructure: chips, networking, memory, and cloud
AI software: enterprise tools, automation, developer platforms
Cybersecurity: securing models and data
Telecom: AI-optimized 5G/6G networks
Healthcare AI: diagnostics and drug discovery
Autonomous systems: robotics, manufacturing, and self-driving
This diversification reduces risk while capturing the big gains offered by emerging firms.
The decision by David Tepper — one of the world’s most closely watched hedge-fund managers — to reduce Nvidia but rotate into other industry-leading AI stock illustrates what many large investors are doing in 2025. It also emphasis how AI is not a single-company story. It’s an ecosystem. And sophisticated investors are spreading capital across the ecosystem to capture long-term growth.
For top money managers and insitutional investors, investing more in AI is critical as this tool is becoming foundational to the global economy. They know that the profit potential remains enormous and it can be capitalized over the long-term.
Even when investors like Tepper rotate away from a specific stock, the direction of capital is clear: AI remains the most important growth theme of this decade, and institutional investors are betting on this by taking large positions.
For mainstreet investors it’s also clear: invest but keep your investments diversified. To do this, consider doing your own research on each AI-driven firm — understand what market fundamentals will help shape the success of the company and whether or not it’s worth the investment risk. Another option is to consider an exchange-traded fund (ETF) with a focus on AI. For instance, Global X Artificial Intelligence Semiconductor Index ETF (TSX:CHPS) focuses on semiconductor companies that power AI, while Global X Robotics & AI Index ETF (TSX:RBOT) offers broader robotics and AI exposure.
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