David Tepper explains why you shouldn't buy the dip in Nvidia stock

Investing.com -- David Tepper, founder of Appaloosa Management, advised caution when it comes to buying the dip in Nvidia (NASDAQ: NVDA) stock, citing uncertainty in the long-term growth prospects of artificial intelligence.

In an interview with CNBC's "Squawk Box" on Thursday, Tepper revealed that while Nvidia's stock looks attractive to him, he remains hesitant about making further investments in the chipmaker.

"We sold a lot of our Nvidia. We thought [it] was too high at the time and would come down. Unfortunately, we didn't buy it when it came back down," Tepper told CNBC.

The hedge fund manager reduced his Nvidia holdings by more than 80% in the second quarter, bringing his stake to about $85 million by the end of June, according to CNBC.

While Tepper acknowledged that Nvidia, a major player in the AI boom, could still have some upside, he expressed doubts about the sustainability of AI demand.

"Do you have enough power for the growth? Do you have the next generation models that can take their chip?" he questioned, when talking to CNBC.

Nvidia has seen a meteoric rise, gaining close to 200% in the last 12 months and more than 157% this year. The stock is up a further 2.9% in Thursday's session, with its market cap currently sitting at well over $3 trillion.

However, Tepper remains uncertain about whether the company can maintain this trajectory, particularly beyond 2026.

He explained that "different things that have to happen to make the growth projections happen."

"I'm not saying it won't happen. I'm just not smart enough to know if they will," he said to CNBC.

Tepper also highlighted his hesitation to invest in Nvidia due to the unpredictable nature of AI's impact on earnings. "The variation of where that earnings can be is too much. So it's not my preferred vehicle," he told CNBC.

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