This Billionaire Loaded Up on Advanced Micro Devices Stock. Should You?

Stock Market

Are you willing to give a chip champ a chance? At least one hedge-fund luminary bought a big chunk of Advanced Micro Devices (NASDAQ:AMD) stock not long ago, so perhaps there’s more upside in store. On the other hand, value-focused financial traders might be reluctant to take a share position in AMD now.

Advanced Micro Devices, commonly known as AMD, is highly favored on Wall Street as a top-tier microprocessor manufacturer. Among other products, AMD makes powerful microchips for artificial intelligence (AI) applications.

I’m certainly not suggesting that anyone should buy AMD stock just because a wealthy person did. Still, it’s a positive sign when a high-powered investor buys a stock. So, let’s find out who disclosed a gigantic share position in AMD recently.

Who Bought Over 2 Million Shares of AMD Stock?

I won’t keep you in suspense any longer. Reportedly, David Tepper (or more precisely, his hedge fund, Appaloosa LP) disclosed a new, huge AMD share position. Tepper has been called “arguably the greatest hedge fund manager of his generation.”

A filing revealed Appaloosa LP’s new position of 2.3 million AMD stock shares. Even if the stock falls to $100, that’s still a $230 million share position in AMD.

Unfortunately, there’s no way to know exactly why Tepper decided to take such a large stake in AMD. I will refer to an old saying, though: People sell stocks for a variety of reasons, but they only buy a stock if they think it will go up.

This leads us to the billion-dollar question: Will AMD stock go up in the coming months? And should you buy it like Tepper did? You’ll definitely want to consider your investing philosophy before making any financial decisions.

Choosing Momentum or Value

If the concept of momentum appeals to you, then you might choose to take a position in AMD now. There’s no denying that AMD’s investors have momentum on their side, as the shares are worth roughly 50% more than they were at the start of 2023.

Contrarians and value-focused investors, on the other hand, might be reluctant to buy AMD stock. After all, AMD’s trailing price-to-earnings (P/E) ratio of 580x is quite elevated.

This isn’t to suggest that AMD offers no value to its shareholders. Notably, AMD’s second-quarter 2023 earnings per share (EPS) of 58 cents beat the analysts’ consensus estimate of 57 cents, and the company’s revenue of $5.36 billion exceeded Wall Street expectation of $5.32 billion.

Thus, AMD is selling plenty of top-tier tech products and delivering adequate financial results. It just might be hard for some investors to accept AMD’s rich valuation. If that’s the case, then they can wait until the share price comes down 20% or 30% (if that actually happens) before taking a share position.

AMD Stock: You Can Invest Like a Legend

We might not know exactly why Tepper’s fund took a multimillion-share stake in AMD. Nevertheless, momentum-focused traders can be like Tepper and invest in AMD (albeit at a smaller scale than Appaloosa LP).

In contrast, value seekers and contrarians may choose to wait for AMD’s valuation to come back down to earth. That’s perfectly understandable, but don’t be surprised if AMD stock continues to head higher.

After all, Tepper is known as an investing legend. So, feel free to assess your strategy and, if you’re bullish on this best-in-class chipmaker, consider a small-scale share position in AMD today.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.