Video: AI Is Creating a New Era of Dispersion
As AI increases dispersion among companies, we believe it may become just as important to identify those vulnerable as it is to pick the winners.
Kevin Collins: We believe artificial intelligence has the potential to reorder every industry by changing how companies operate, compete, serve customers, and monetize their products and services. That can create dispersion, as technological shifts often produce both beneficiaries as well as vulnerable companies.
Today’s AI revolution is unfolding much faster than many expected. AI has reached major adoption milestones far more quickly than the internet, which took roughly 15 years to reach 50% user penetration.
AI is Increasing Dispersion
Kevin: New businesses are being created and gaining scale quickly. For example, AI lab Anthropic has moved from $5 billion in annual revenues to $47 billion in just 16 months. We believe it may become just as important to identify those vulnerable as it is to pick the winners as AI increases dispersion among companies. Chegg, a once leading online tutorial company, saw its market capitalization collapse by 20X since the introduction of ChatGPT in the 4Q of 2022.
AI is Reshaping Industries
Kevin: In our view, AI is reshaping opportunities across the economy in different ways.
One example is within power. Data centers are enormous consumers of electricity. We think independent power producers with nuclear-generated electricity have become attractive suppliers to data centers because they can offer clean, reliable, uninterrupted power at commercially set prices.
AppLovin is another example, with AI reshaping digital advertising. Its AXON engine uses improved ad targeting, bidding, user acquisition, and performance measurement in real time. While the company was historically focused on mobile gaming advertising, AXON has helped expand it to its opportunity into e-commerce, a much larger addressable market.
AI: Today’s Winners May Not be Tomorrow’s Winners
Kevin: Today’s dominant company is not always tomorrow’s winner.
We’ve seen this before. Blockbuster Video is a simple example from the entertainment industry. Blockbuster had thousands of stores and a well-known consumer brand, but its business model was built around physical rental locations, store inventory, and late fees. Netflix changed the consumer experience by removing late fees and offering greater convenience through DVD-by-mail, before ultimately moving to streaming.
Blockbuster’s problem was not that people stopped watching movies. It was that consumers preferred easier access and greater convenience. Streaming changed the way families consume entertainment.
We believe AI may create similar shifts across industries. In some cases, demand may remain strong, but the way that demand is served may change dramatically. In our view, that is where dispersion can widen. Some companies will adapt and benefit, while others may struggle as their historical advantages become less relevant. We think investors are increasingly focused on whether AI could pressure organic growth, market share, and margins over time. That does not mean incumbents cannot adapt. For investors and allocators, it does highlight the need for selectivity.
As AI changes the landscape, we believe investors may need to reassess long-held assumptions about competitive moats, earnings durability, and terminal value.
Why Active Management Matters
Kevin: A technology revolution that increases dispersion amongst winners and losers is exactly the kind of environment where we believe skilled active managers can prove their worth. For more insights, visit Alger.com.
The views expressed are the views of Fred Alger Management, LLC (“FAM”) and its affiliates as of July 2026. These views are subject to change at any time and may not represent the views of all portfolio management teams. These views should not be interpreted as a guarantee of the future performance of the markets, any security or any funds managed by FAM. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities.
Risk Disclosures: Investing in the stock market involves risks, including the potential loss of principal. Growth stocks may be more volatile than other stocks as their prices tend to be higher in relation to their companies’ earnings and may be more sensitive to market, political, and economic developments. Past performance is not indicative of future performance. Investors whose reference currency differs from that in which the underlying assets are invested may be subject to exchange rate movements that alter the value of their investments. Companies involved in, or exposed to, AI-related businesses may have limited product lines, markets, financial resources or personnel as they face intense competition and potentially rapid product obsolescence, and many depend significantly on retaining and growing their consumer base. These companies may be substantially exposed to the market and business risks of other industries or sectors, and may be adversely affected by negative developments impacting those companies, industries or sectors, as well as by loss or impairment of intellectual property rights or misappropriation of their technology. Companies that utilize AI could face reputational harm, competitive harm, and legal liability, and/or an adverse effect on business operations as content, analyses, or recommendations that AI applications produce may be deficient, inaccurate, biased, misleading or incomplete, may lead to errors, and may be used in negligent or criminal ways. AI companies, especially smaller companies, tend to be more volatile than companies that do not rely heavily on technology.
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The following positions represented the noted percentages of Alger's firm-wide assets as of April 30, 2026: Chegg Inc, 0.00%; Applovin Corp, 1.82%; Netflix, Inc., 0.56%; Anthropic, 0.32%; Open AI Group PBC, 0.10%.
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