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Alger's Approach to Investing in Artificial Intelligence

Inside Alger’s approach to investing in artificial intelligence: market outlook, investing framework, and featured growth equity strategies.


An Artificial Intelligence Revolution: Why Investing in AI Matters Now

Artificial intelligence (AI) is entering a new phase of accelerated development driven by recent technological breakthroughs. While AI has been studied for decades, its recent progress reflects the convergence of three foundational factors:

  • Advances in network architecture
  • Increasingly powerful semiconductor chips
  • Expanding availability of high-quality data

AI adoption is occurring faster than prior general-purpose technologies. The internet and social media took roughly 14 years and 9 years, respectively, to reach more than half of U.S. households, while generative AI reached half of households in just three years. This accelerated adoption underscores the speed at which AI tools are being integrated into everyday use.

Rising adoption of AI is contributing to increased demand for computing power and supporting infrastructure. This demand is driving an investment cycle that extends well beyond chips and servers to include data centers, power generation, electrical infrastructure, and advanced manufacturing capacity needed to support surging AI workloads.

AI is influencing growth across a range of industries and business models, which we believe indicates the AI market is positioned for expansion, creating potential investment opportunities ahead.

Projected Global Artificial Intelligence Market Size

The global artificial intelligence market is forecast to grow nearly six-fold in the next 10 years, potentially reaching $3.7 trillion. The chart below shows year-by-year market size projections from Precedence Research.

Global artificial intelligence market size chart.  

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Alger’s AI Investment Framework: Identifying Opportunities Across the AI Value Chain

Alger’s approach to investing in AI includes identifying companies that are the “Enablers” and “Adopters” of this powerful technology.

  • Enablers: Companies developing the building block components for AI infrastructure such as machinery, hardware, software, and services.
  • Adopters: Companies that integrate AI into their businesses to enhance their products or services or make their operations more productive.​​
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Diagram showing Alger AI investments split between enablers and adopters.  

Learn About Potential Opportunities with Alger’s AI Investment Map

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Illustrated map showing AI investment opportunities.

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We frequently share new perspectives on AI, including videos, podcasts, commentaries and more.

Frequently Asked Questions

Investing in artificial intelligence starts with understanding the companies across the AI ecosystem. The AI enablers are those companies that are building the infrastructure for AI to operate and grow. Examples include data centers, GPU manufacturing, and power generation. The AI adopters are those companies using AI to improve products, services, and operations. Examples include advertising, medical devices, and aerospace.

Alger’s research-driven approach can help identify companies benefiting from AI-driven change over time.

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AI investment opportunities span both the companies building AI technology and those applying it. At Alger, this is framed as AI enablers and AI adopters.

​ Enablers include areas such as semiconductors, data centers, energy providers, and cloud infrastructure, while adopters span industries using AI to enhance productivity and innovation. On the other hand, AI adopters are companies using AI to improve products, services, and operations.
The artificial intelligence market is expanding rapidly as adoption increases across industries. Forecasts suggest the market could grow significantly over the next decade, potentially reaching $3.7 trillion according to projections from Precedence Research, reflecting rising investment in infrastructure, software, and applications.

​ Growth will depend on continued adoption, technological advancement, and global demand.
AI-related investments come with risks tied to rapid technological change and evolving competition. Companies may face product obsolescence, regulatory developments, and shifts in demand. Please see below for important disclosures related to investing in AI.

​ Like all equity investments, results can vary and are influenced by market conditions and company fundamentals.
Identifying successful AI companies requires analyzing both technological positioning and fundamental business strength. At Alger, this includes assessing whether a company is enabling AI development or effectively adopting AI to drive growth and productivity.

Fundamental research focuses on companies demonstrating Positive Dynamic Change, supported by strong management, competitive advantages, and clear paths to revenue growth.

​ Evaluating both innovation and execution helps identify companies positioned to benefit as AI adoption expands.
Choosing between active and passive AI funds depends on how investors want to gain exposure to the artificial intelligence market. Passive strategies typically track an index and provide broad exposure to companies associated with AI, while active strategies aim to identify specific companies benefiting from AI-driven change.

​ In emerging and fast-moving areas like AI, active management can offer flexibility to invest across both AI enablers and AI adopters and adjust exposures as the value chain evolves.

A research-driven approach may help identify innovative companies with strong fundamentals and evolving growth potential over time.
Investors can access artificial intelligence through a range of investment vehicles depending on their goals and preferences. These may include exchange-traded funds (ETFs), mutual funds, and separately managed accounts (SMAs) that provide exposure to companies involved in AI.

​ Some of these strategies focus broadly on companies developing or adopting AI, while others take a more targeted approach to specific segments of the AI ecosystem. A diversified vehicle can provide exposure across the AI value chain, including both enablers and adopters.

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Have questions about Alger’s approach to investing in artificial intelligence? Fill out the form below, and an Alger representative will be in touch to provide the information and support you need.

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.

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.

Investing in innovation is not without risk and there is no guarantee that investments in research and development will result in a company gaining market share or achieving enhanced revenue. Companies exploring new technologies may face regulatory, political or legal challenges that may adversely impact their competitive positioning and financial prospects. Developing technologies to displace older technologies or create new markets may not in fact do so, and there may be sector-specific risks. There will be winners and losers that emerge, and investors need to conduct a significant amount of due diligence on individual companies to assess these risks and opportunities.

This material is not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities.

Alger pays compensation to third party marketers to sell various strategies to prospective investors.

Before investing, carefully consider the Fund’s investment objective, risks, charges, and expenses. For a prospectus and summary prospectus containing this and other information or for the Fund’s most recent month-end performance data, visit www.alger.com, call (800) 223-3810 or consult your financial advisor. Read the prospectus and summary prospectus carefully before investing. Distributor: Fred Alger & Company, LLC. Listed on NYSE Arca, Inc. NOT FDIC INSURED. NOT BANK GUARANTEED. MAY LOSE VALUE.

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