Why David Tepper isn’t buying Nvidia in the downturn.

“We sold a lot of our Nvidia shares. We thought the price was too high at the time and that it would drop. Unfortunately, we didn’t buy when it dipped again,” Tepper said in a broadcast yesterday. “Stocks like Nvidia have the following unknowns: Do they have enough power for growth? Do they have the next generation of models that can accommodate their chip?” The hedge fund manager sold more than 80% of his stake in Nvidia in the second quarter, reducing his position to about $85 million by the end of June. The billionaire investor mentioned that companies benefiting from artificial intelligence, like Nvidia, might still have some upside potential, but he’s uncertain about the long-term demand for AI and whether it could significantly contribute to the economy.

Tepper noted that he somewhat likes Nvidia’s stock at these levels, but investors need to believe in a long-term growth story to make large purchases here. “As time goes on, various things need to happen to meet the growth projections,” he said. “I’m not saying it won’t happen. I’m just not smart enough to know if it will.” Chipmaker stocks have been rising due to optimism that the AI boom will drive companies to buy more semiconductors and memory to handle the increasing computational demands of AI applications.

Nvidia has stood out as the biggest winner in AI so far. After surging 238% in 2023, the stock has risen another 150%, reaching a market capitalization of over $3 trillion. However, the stock remains 12% below its all-time high, reached in June. Tepper admitted that he cannot effectively assess where Nvidia’s earnings will be in 2026 and beyond because the AI narrative is too volatile, making him hesitant. “There are too many unknowns regarding how this might develop, and the earnings variations… are too large. That’s why it’s not my preferred investment compared to other things I have more confidence in,” Tepper added.