Despite the ongoing threat of tariffs, billion-dollar hedge fund Appaloosa Management is betting on Chinese AI picks — at the expense of American tech giants. According to a holdings filing released in early February, the fund had adjusted its holdings to devote about 37% of assets to China-related picks. This buying spree came at a price for names like Lyft (NASDAQ: LYFT) and Amazon.com (NASDAQ: AMZN), which saw massive sell-offs.
What do these portfolio reductions say for American tech giants? Let’s take a look at what analysts are saying about these tech stocks, which Appaloosa Management reduced holdings in the last period.
2.25 Million Shares of LYFT Ride Out of Apploosa’s Portfolio
The biggest loser in Appaloosa Management’s most recent sell-off was ride-sharing app Lyft, which saw its holdings in the fund reduced by about 14%. This continues a turbulent trend for the transportation service, which maintains a Hold rating from analysts amid disappointing earnings data released on February 11th.
While analysts continue to hold their breath on Lyft, comparative financials look bleak. For example, rideshare competitor Uber (NYSE: UBER) recently beat earnings estimates by more than 540% of what analysts expected — at the same time, Lyft posted a $0.10 EPS, 50% lower than expected. If Lyft isn’t able to improve investor confidence before the next earnings period, it is likely to continue the negative share price return seen so far since February 2024.
Amazon.com Sees Holdings Reduced by 600K Shares
The second largest tech holding reduction seen in Appaloosa’s most recent sell-off was Amazon.com, which saw its holdings reduced by 18.75%.
Despite this reduction for Appaloosa Management, analyst forecasts for Amazon remain tentatively optimistic. The stock maintains a Moderate Buy rating and an average price target of $260 per share. Its short interest is also a positive point to note, with just 0.67% of shares shorted and a 13.69% reduction in short interest since last month.
Why is Appaloosa Management reducing its holdings in Amazon.com if analysts generally agree that the outlook is positive? The answer could be an opportunity cost. While analysts predict a 14% potential upside for Amazon, China’s e-commerce market has steadily grown to become the largest in the world. Major portfolio additions like JD.com, Inc. (NASDAQ: JD) nod to this trend, indicating that fund managers may believe this growth trend will continue to outpace the U.S.
Oracle Sees 11% Reduction in Share Holdings
Another tech company that saw its shares reduced was Oracle (NYSE: ORCL). The hedge fund sold off about 173,000 shares of the business software service provider, which saw a massive 31% increase in short interest from the previous month.
Despite this short interest spike, Oracle is another sale that goes against analyst trends. The stock currently holds analysts' solid Moderate Buy rating, with a 5.32% potential upside.
This could mean that the hedge fund’s sell-off is another case of opportunity cost reassessment, devoting more resources to tech companies with software departments like Alibaba Group Holding Limited (NYSE: BABA).
What Is Appaloosa Management Buying?
As Appaloosa Management sold off millions in shares of American tech companies, Chinese software, and e-commerce companies walked away as major winners. The biggest addition to the hedge fund’s portfolio was JD.com, which saw its holdings increase by 43%. Other winners include leading Chinese search engine service provider Baidu, Inc. (NASDAQ: BIDU) and EV manufacturer Li Auto (NASDAQ: LI).
Chinese stocks weren’t the only winners in Appaloosa’s most recent buying spree. In addition to individual shares, Appaloosa also increased its holdings in the KranShares CSI China Internet ETF (NYSE: KWEB) by 21.5%. The hedge fund also increased its holding in general international large-cap fund iShares China Large-Cap ETF (NYSE: FXI) by 14%. These purchases, when combined with the hedge fund’s sell-off, speak to its confidence in Chinese AI research and development.
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