Key Points

Appaloosa Management's top seven holdings are all tech companies, except for Vistra.
Vistra has signed long-term power supply deals with big tech companies like Meta Platforms.
Vistra finished the first quarter with net income of around $1.03 billion, after operating in the negative last year.

Billionaire David Tepper built much of his wealth through Wall Street investments, making it natural for observers to examine his hedge fund's positions for insight into his strategy. As of the first quarter, Tepper's hedge fund Appaloosa Management managed $5.93 billion in assets, with a notable portion tied to a lesser-known energy firm.

Vistra (NYSE: VST) represented 5.12 percent of the portfolio and ranked as the seventh-largest position. The holdings ahead of it include Amazon, Micron, Alphabet, Uber, Taiwan Semiconductor Manufacturing, and Alibaba, all classified under technology.

So why does Tepper and Appaloosa show strong interest in Vistra? The following analysis explores the details.

What does Vistra do?

Vistra operates as an energy provider with two primary revenue streams. Retail operations deliver power to roughly 5 million residential, commercial, and industrial clients. Power generation produces about 44,000 megawatts of electricity sold into major U.S. grids, drawing from natural gas, nuclear, coal, solar, and battery storage sources.

Tepper and Appaloosa appear to have boosted their Vistra stake due to the generation segment, which connects unexpectedly to artificial intelligence growth.

A different way to invest in AI

Beyond Uber, the larger Appaloosa positions than Vistra all relate to AI through cloud services, hardware, or manufacturing. Although Vistra itself is not an AI company, it stands to gain from the expanding AI sector.

Data centers require continuous high power levels to support AI workloads. As hyperscalers invest hundreds of billions in new facilities, they secure supply agreements with providers such as Vistra. Earlier this year Vistra entered a 20-year power purchase agreement with Meta Platforms, a development that likely influenced Tepper's increased commitment.

Is now the time to invest in Vistra?

Over the past 12 months Vistra shares declined about 12 percent as of July 22, missing some of the AI-driven gains seen in related stocks. This move may reflect Tepper positioning ahead of further developments.

In the prior year's first quarter Vistra posted a $268 million loss. The same period this year produced $1.03 billion in net income, indicating a return toward stronger performance levels such as the $1.84 billion recorded in the third quarter of 2024.

Vistra has not yet captured the full extent of AI-related benefits, yet its current setup appears favorable. Share price swings may deter conservative investors.

Should you buy stock in Vistra right now?

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Stefon Walters holds shares in Taiwan Semiconductor Manufacturing. The Motley Fool maintains positions in and recommends Alphabet, Amazon, Meta Platforms, Micron Technology, Taiwan Semiconductor Manufacturing, Uber Technologies, and Vistra. The Motley Fool recommends Alibaba Group. The Motley Fool maintains a disclosure policy.

The views and opinions expressed are those of the author and do not necessarily reflect those of Nasdaq, Inc.