Billionaire David Tepper's Appaloosa Management Returned 32% Through the First Half of the Year. Here Are His Top 3 Stocks.

David Tepper is one of the most successful hedge fund investors in the world. His Appaloosa Limited Partnership compounded at roughly 25% annualized after fees from its founding in 1993 through 2019, when he began returning cash to outside investors.

Today, roughly 90% of the capital in Appaloosa belongs to Tepper himself, and he continues to produce phenomenal returns. Through the first half of the year, the fund was up 32%.

While Tepper has kept a significant amount of cash on hand, concentrated bets on a handful of stocks have helped drive those returns. Around 40% of his public equity portfolio is held in just three stocks, according to the fund's most recent 13-F filing. Here's whether they're still worth buying today.

1. Amazon (17.7% of equities)

Tepper doubled his stake in Amazon (NASDAQ: AMZN) in the first quarter and added to it in the second quarter, making it the largest holding in his portfolio. His 5 million shares are worth about $1.25 billion as of this writing.

Amazon is both the world's largest online retailer and cloud computing platform. Amazon has successfully built a wide moat around its e-commerce business by developing a massive logistics network. Over the last few years, management has focused on improving efficiencies to drive operating margin higher.

At the same time, it's spending huge sums of cash to add compute capacity for its cloud computing business, Amazon Web Services (AWS). That's pushed its free cash flow into negative territory over the last 12 months. CEO Andy Jassy argues that Amazon has a clear view toward strong returns on the invested capital, thanks to long-term contracts with its customers and relatively short payback periods on new servers and networking equipment.

This isn't Amazon's first major investment cycle that's pushed free cash flow into negative territory. Amazon has executed this playbook in the past, and it's ultimately grown to produce much more free cash flow over the long run. While the stock is trading above its March and April lows, shares still look attractive at 30 times forward earnings expectations.

2. Micron Technology (12.4%)

Micron Technology (NASDAQ: MU) is one of the three main memory chipmakers in the world. Tepper also has exposure to its Korean competitors through an ETF. Micron stock climbed more than 300% through the first half of 2026, prompting Tepper to cut his stake in the company by about 41% last quarter. Even so, it remains one of his top holdings.

A severe supply shortage has fueled Micron's strong performance this year, driven by booming demand for artificial intelligence compute. Micron and its peers have been slow to expand manufacturing capacity after significantly overbuilding in past demand cycles. While they've all committed to major capacity expansions at this point, management estimates the market won't reach equilibrium until at least 2029.

Micron is an extremely cyclical stock. Management has taken steps to reduce earnings cyclicality by locking in pricing through strategic agreements with its customers, but that also caps the upside potential for earnings amid supply constraints.

While the stock price has pulled back since mid-year, shares still trade as if the earnings cycle will last a lot longer or earnings will climb significantly higher from here. Tepper was smart to take some cash off the table.

3. Taiwan Semiconductor Manufacturing (9.9%)

Taiwan Semiconductor Manufacturing (NYSE: TSM) is another AI stock that Tepper has added to over the past year. His stake increased 61% from mid-2025 to mid-2026. The stock price more than doubled during that period, pushing the world's leading contract chip manufacturer to one of Tepper's largest holdings.

The stock could keep climbing from here. The company showed accelerating revenue growth in the third quarter, exceeding its own forecast and analysts' expectations. Growing AI budgets should continue to benefit TSMC, as it offers best-in-class chip manufacturing technology, and it has the capacity to meet demand for high-end AI chips.

TSMC has been taking advantage of that position by raising prices on its older production processes and accelerating production ramp-ups for new technology (which ensures it can maintain high profit margins by maximizing utilization).

Management's long-term guidance calls for 25% annualized revenue growth between 2024 and 2029. However, after very strong growth in 2025 and the first three quarters of 2026, it'll likely need to raise that target. The company appears capable of growing revenue at 25% per year through the rest of the forecast period.

With the stock trading at just 25 times forward earnings expectations, it looks like a great opportunity among top AI stocks. It wouldn't be a surprise if Tepper added to the position last quarter.

Adam Levy has positions in Amazon and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Amazon, Micron Technology, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.