The Motley Fool·2025-09-26 07:51Core Viewpoint - Appaloosa's chief, David Tepper, has shifted his investment focus from Oracle to Taiwan Semiconductor Manufacturing Company (TSMC), highlighting the importance of companies critical to AI supply chains [1][5]. Investment Decisions - Tepper has been selling Oracle shares for five consecutive quarters, reducing his stake by 93% from a peak of 2,300,000 shares at the end of March 2024 [6][7]. - Despite selling Oracle, the stock has doubled in value over the past six months, driven by strong sales guidance and a 359% increase in remaining performance obligations (RPOs) to $455 billion [8][9]. - Tepper's selling of Oracle may have been influenced by profit-taking, as the stock rallied nearly 50% from March to November 2024 [10]. Market Conditions - The S&P 500's Shiller price-to-earnings (P/E) ratio approached 40, indicating a historically high valuation, which may have contributed to Tepper's decision to sell [11]. - Oracle has missed consensus earnings per share (EPS) expectations in three of the last four quarters, potentially affecting investor sentiment [12]. Shift to AI Hardware - In the June-ended quarter of 2025, Tepper began purchasing AI hardware stocks, including Nvidia and 8 million shares of Intel [14][15]. - TSMC is viewed as a critical player in the AI supply chain, with its CoWoS technology essential for high-compute data centers [16]. TSMC's Growth Potential - TSMC's diversification into wireless chips, IoT devices, and next-generation automobiles provides steady cash flow, complementing its growth in advanced AI chips [17]. - Tepper's investment in TSMC occurred at a forward P/E ratio of 12 to 18, presenting an attractive entry point given the company's projected solid double-digit sales growth [18]. - Tepper purchased 755,000 shares of TSMC in Q2 2025, bringing his total holdings to 1,025,000 shares [19].