Billionaire hedge fund manager loves this AI stock, and it isn’t Nvidia

The Magnificent 7 stock started this week on a weaker note to raise some potential concerns about a slowdown on AI-related spending or a shuffling of trends toward competing stocks for the likes of Nvidia. Despite this latest decline, most Wall Street experts are optimistic for Nvidia. This is beginning, however to get a lot of individuals to consider exploring other AI stocks because of this tremendous growth prospect.

Several chipmakers and other top tech firms are straining hard to take their portion of this market, very much in demand. Even so, some investors have set their sights on the next Nvidia competitor. The CEO of one hedge fund was optimistic about Advanced Micro Devices, an AMD primary rival of the giant.

Even as Nvidia continues to be one of the prominent AI stocks, increasing competition has somewhat diverted the spotlight toward AMD. David Tepper, Appaloosa Management’s founder, believes that AMD is a serious contender for Nvidia. Data from Insider Monkey indicate that Tepper’s fund holds a stake in AMD valued at $186.23 million, which like the current Nvidia, has seen declining stock values. Given that both firms are very similar, AMD is a natural rival to Nvidia’s position in the market.

Both companies, Nvidia and AMD, are producing graphics processing units which are vital for artificial intelligence application, performing tasks like training large language models and other machine learning calculations. Even though AMD mainly focused on general-purpose CPUs, Nvidia entered this line in 2021 with the Grace processor. However, with their significant contribution to powering the data centers, AMD built strong customer base in the market that comprises Meta Platforms, Google, and Microsoft.

As noted by Insider Monkey, the demand for data center chips is rising for AMD. For instance, it had 1.5 million units of AMD’s EPYC processor by Meta Platforms, which gave AMD a 122% rise in its data center revenue in the third quarter. This segment now makes up about half of AMD’s total revenue. In addition, in 2025, AMD continues to expand its AI efforts. Its $4.9 billion acquisition of ZT Systems, a server-builder, is an example of that strategy. The transaction will close in the first half of 2025, building further on AMD’s AI positioning.

Currently, 107 hedge funds are holding positions in AMD stock. It also ranks among Tepper’s top ten stock picks for 2025, along with companies like Meta, Microsoft, and Amazon—but notably not Nvidia.

The shift toward AI stocks beyond Nvidia raises questions about future trends. Investment writer Eddie Pan, author of the Hedge Vision newsletter, shared insights with TheStreet about institutional sentiment. While investors aren’t fully embracing AI stocks outside Nvidia, signs of diversification are emerging.

Pan notes hedge funds such as Philippe Laffont’s Coatue that is growing its bet on AI infrastructure stocks like Constellation Energy and GE Vernova. Broadcom is also seeing tailwinds in its custom silicon chips, an emerging trend that could give it an edge over Nvidia as early as 2025. “It could easily be the number-one stock in the AI space,” Ed Ponsi of TheStreet Pro notes.

Stanley Druckenmiller has also invested in chip maker Coherent and equipment maker Woodward, showing confidence in stocks beyond Nvidia. Pan asserts that the AI revolution is far from over and there remains a lot of space to be filled by other firms besides NVDA.