DeepSeek AI Sparks Stock Market Frenzy—David Tepper's Hedge Fund Cashes In on the Boom

Billionaire investor David Tepper founded the Appaloosa Management hedge fund in 1993, which currently has over £5.1 billion in assets under management. Tepper is renowned for his high-risk, opportunistic trading approach. He has a personal net worth of £16.83 billion.

Tepper was heavily investing in distressed assets during the 2008 global financial crisis. He purchased nearly £1.58 billion worth of commercial mortgage-backed securities at face value from AIG and made a £5.53 billion profit on the trade after the US government stepped in to save the banks.

Tepper's aggressive investing style was reflected in his latest Q4 2024 SEC filing, where he ramped up his stake significantly in Chinese tech stocks right before the Mainland's stock market embarked on a £1 trillion rally triggered by the launch of DeepSeek's R1 AI model in January.

Alibaba, JD.com Are Among Tepper's Favourite Chinese Stocks For Q4

For the quarter ended 31st December 2024, Tepper increased his stake in Alibaba Group Holding Ltd. (NYSE:BABA) by 18.43% to own 11.84 million shares worth £790.61 million.

Meanwhile, he purchased 3.17 million shares of JD.com (NASDAQ:JD) to increase his stake in the Chinese tech giant by 43.37%. Tepper now owns 10.47 million JD.com shares worth £362.85 million.

Both stocks have jumped over 60% in the past six months and have continued to climb steadily since the launch of DeepSeek's AI model in January. Alibaba's stock rally was further boosted after the launch of its own AI model, Qwen 2.5 Max LLM, on the first day of the Lunar New Year. The company claimed that Qwen 2.5 Max topped DeepSeek's R1 model across benchmarks and showed impressive results compared to OpenAI's ChatGPT-4o and Meta Platform's (NASDAQ:META) Llama-3.1-405B model.

The hedge fund manager also ramped his stake in Baidu Inc. (NASDAQ:BIDU) by 7.22% to own 1.53 million shares, worth £101.84 million. The stock has gained over 9% year-to-date after facing consistent selling pressures throughout 2024.

Tepper also increased his stake in a Chinese real estate holding company called KE Holdings Inc. (NYSE:BEKE). In Q4, he bought 399,070 shares to own 2.57 million company shares worth £37.48 million.

Investors Reassess China's Stock Market

The Chinese stock market has been battling prolonged volatility amid Donald Trump's tariff threats. The volatility worsened when Beijing announced monetary stimulus measures in September 2024. The development sparked a short-lived rally in early October, but the market lost momentum in the next months due to a weak economic outlook and the ongoing property crisis.

However, the DeepSeek AI launch sent US equities in limbo as investors questioned the narrative that top AI companies need billions of dollars in capital to build cutting-edge AI models. As the global AI industry was catching up with DeepSeek's disruption, the company now plans to launch its R2 AI model as early as possible while industries and educational institutions on the Mainland rapidly integrate the R1 model within existing infrastructure.

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