Tepper's Appaloosa Ups Bet on China Tech, Alibaba Top Pick

Appaloosa shifts focus to Chinese tech, making Alibaba top holding amid sector's upward trend and mixed earnings reports.

By Alex P. Chase

5/15, 17:33 EDT
Adobe Inc.
Boeing Company
Alibaba Group Holding Limited
Baidu, Inc.
Alphabet Inc.
JD.com, Inc.
Meta Platforms, Inc.
Microsoft Corporation
Pinduoduo Inc.

Key Takeaway

  • Appaloosa Management, led by David Tepper, has significantly increased its investment in Chinese tech stocks, making Alibaba its top holding.
  • The fund's pivot towards Chinese tech includes new stakes in PDD Holdings, Baidu, and ETFs like FXI and KWEB amidst a 19% rise in KWEB Q2 2024.
  • Mixed earnings from Chinese tech giants like Alibaba and Tencent have not deterred Appaloosa's strategic shift, despite potential economic headwinds.

Appaloosa's Strategic Shift

Billionaire investor David Tepper's hedge fund, Appaloosa Management, has made significant adjustments to its investment portfolio in the first quarter of 2024, showing a pronounced pivot towards Chinese technology stocks. The fund's latest quarterly report reveals that Alibaba has become its top holding, following a substantial investment worth several hundred million dollars. In addition to Alibaba, Appaloosa has notably increased its stakes in PDD Holdings and Baidu, elevating both companies into its top ten holdings. This strategic shift is further underscored by new investments in stocks with a Chinese focus, including Adobe, the iShares FTSE China Large-Cap ETF (FXI), JD.com, and the Kraneshares CSI China Internet ETF (KWEB).

While Appaloosa maintains significant positions in American technology giants, the fund has reduced its exposure to some of these companies, including Alphabet and Meta Platforms, during the same period. The fund also disclosed holding put options against Microsoft, hinting at potential further selling in the upcoming quarter. Beyond technology, Appaloosa exited its position in HCA Holdings, a hospital stock, and initiated a new, albeit small, position in Boeing.

Chinese Tech Stocks on the Rise

The strategic bets made by Appaloosa come at a time when Chinese technology stocks are experiencing an upward trend. The Kraneshares CSI China Internet ETF (KWEB), for instance, has seen a 19% increase in the second quarter of 2024. This positive momentum in Chinese tech stocks is set against a backdrop of anticipation for the earnings reports from major companies in the sector, including Tencent and Alibaba, followed by Baidu and JD.com. Investors and market observers are keenly watching these developments, looking for fresh catalysts that could further propel the recent gains.

Mixed Earnings and Market Reactions

The earnings reports from Chinese tech giants have yielded mixed results. Alibaba reported a significant drop in net income, which, despite a buyback announcement, did not manage to uplift the stock. Conversely, Tencent exceeded expectations but expressed a cautious outlook on the Chinese economy's future. The market is now looking towards Baidu and JD.com for clearer signals on the sector's health. Amid these mixed corporate outcomes, there is speculation that Chinese policymakers might lower medium-term lending facility (MLF) rates, a move that could support the stock market by addressing disappointing credit data and stimulating demand.