AI's Escape Velocity?
We examine how one of today’s AI leaders compares with the most successful high-growth firms of the past and what investors can learn from the differences.
As the growth in revenue derived from artificial intelligence (AI) services accelerates, AI model companies are scaling in ways that challenge traditional assumptions about the time required to build large businesses. How do today’s AI leaders compare with the most successful high‑growth firms of the past, and what can investors learn from the differences?
- AI leaders are achieving exceptional absolute revenue growth on a compressed timeline as customers find meaningful value in their services, in our view. In addition to consumer usage for everyday tasks (e.g., planning a vacation, summarizing emails), enterprise adoption of AI solutions is broadening across areas such as life sciences research and drug discovery, software development, and customer service workflows.
- In the chart above, today’s AI companies are generating revenue materially faster than those high-growth firms of prior cycles. AI lab Anthropic scaled its annualized revenue from $1 billion to $30 billion in under 2 years, well ahead of the 8 to 11 years it took Alphabet and Amazon to cover the same ground. We believe this in part reflects the fact that each new Anthropic model release expands addressable use cases, shortening the path from initial adoption to enterprise-scale spend.
- As AI model companies expand, we believe they necessitate significant increases in AI infrastructure, requiring sustained investment in semiconductors, memory, networking, and data center capacity. In our view, compute, storage, and network connectivity have become essential to the continued growth of AI model companies.
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The views expressed are the views of Fred Alger Management, LLC (“FAM”) and its affiliates as of May 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. Private placements are offerings of a company’s securities not registered with the SEC and not offered to the public, for which limited information may be available. Such investments are generally considered to be illiquid. 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 technology could face increasing regulatory scrutiny in the future, which may limit the development of this technology and impede the future growth. 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 represent firm wide assets under management as of February 28, 2026: Amazon.com, Inc., 5.4%, Alphabet Inc., 4.6%. Anthropic, 0.0%.
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