Nvidia stock (NVDA) and bistra (VST) Both companies have soared 860% and 700%, respectively, since the beginning of 2023. Both companies have benefited from the artificial intelligence (AI) boom, despite operating in completely different sectors of the economy. But billionaire David Tepper, a hedge fund manager at Appaloosa Management, sold one and bought another in the third quarter, as detailed below.
Tepper sold 65,000 Nvidia shares, reducing his position by 9%. Nvidia no longer ranks among the 25 largest holdings in Appaloosa’s portfolio. Mr. Tepper purchased 1.2 million shares of Vistra stock, initiating a new position. Vistra ranks among the 15 largest holdings in Appaloosa’s portfolio.
According to LCH Investments, Appaloosa is among the 15 most successful hedge funds in history, as measured by net income since inception. Therefore, Tepper is a good source of inspiration. However, the above trades took place in the third quarter, which ended a few months ago. The next update is scheduled for mid-February.
In the meantime, here’s the latest from Nvidia and Vistara.
Nvidia: Stocks sold by David Tepper in Q3
Nvidia graphics processing units (GPUs) are the industry standard for accelerated computing. Accelerated computing is the field of using specialized hardware and software to speed up complex data center tasks, such as training large language models or running artificial intelligence applications. According to Mizuho, NVIDIA has a 70% to 95% market share in AI accelerators.
The company is well-positioned to maintain its lead for two reasons. First, we’ve built an unparalleled ecosystem of programming tools called CUDA. It includes hundreds of code libraries and pre-trained models that streamline AI application development. Second, the company earns huge profits, so it can afford to spend a lot on research and development (R&D).
Morgan Stanley analysts recently wrote:
Since 2018, we’ve seen many threats to Nvidia come and go. More than a dozen startups, some efforts by competitors like Intel and AMD, and some custom designs. Most of them are missing. Competing with Nvidia, which spends more than $10 billion a year on research and development, will be tough.
Looking ahead, NVIDIA is targeting a $2 trillion market opportunity. First, data centers are moving from general-purpose infrastructure to accelerated computing, supplementing central processing units (CPUs) with GPUs. Second, some data centers will evolve into artificial intelligence factories, large-scale computing environments built specifically for AI workloads.
Wall Street expects NVIDIA’s adjusted earnings to grow at a rate of 52% annually through fiscal year 2026, which ends in January 2026. Therefore, its current valuation of 53 times adjusted earnings is quite cheap. Indeed, if a company fails to live up to its high expectations, its stock price can fall significantly. But risk-tolerant investors looking to start or expand a position in NVIDIA should consider buying a few shares now.
Vistra: Stocks David Tepper bought in Q3
Vistra operates in the wholesale and retail electricity markets. The company owns coal, natural gas, nuclear, and renewable energy facilities with a total generating capacity of 41,000 megawatts, making it the largest electricity producer in the United States. It also serves approximately 5 million retail customers and is the largest provider of residential electricity in the United States. country.
Earlier this year, Vistra acquired Energy Harbor, adding four nuclear power facilities to its portfolio and making it the second-largest nuclear power producer in the United States. This distinction is important because we believe that is the most reasonable way to deal with increased power demand from data centers.
Vistra’s investment thesis focuses on increasing power demand through industrial reshoring, Permian Basin electrification, and artificial intelligence data centers. The company has a significant presence in the PJM (Eastern US) and ERCOT (Texas) markets, where peak demand is expected to grow at 1.8% and 5% annually through 2030, respectively. Both numbers suggest that demand will be twice as high as before. 10 years before that.
Additionally, Vistra has created significant value for shareholders through stock repurchases. Since the fourth quarter of 2021, the company has repurchased 30% of its outstanding shares at an average price of less than $29 per share. This is an 85% discount to the current stock price of $185. The company plans to spend an additional $2.2 billion on share buybacks by the end of 2026.
Wall Street expects Vistra’s adjusted earnings to grow 23% annually through fiscal 2026. Still, its current valuation of 34 times adjusted earnings looks relatively expensive compared to its historical average.
Most analysts believe the stock price will decline in the short term. The median 12-month price target is $165 per share, which would imply a downside of 11% from the current share price of $185. Prospective investors should take a wait-and-see approach for now and look for opportunities to buy on the spurts.
Trevor Jennewine holds a position at Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, and Nvidia. The Motley Fool recommends the following options: February 2025 $27 short call on Intel. The Motley Fool has a disclosure policy.
