It’s no understatement that AI has redefined not only how companies engage in business, but in how everyday citizens go about their daily lives. However, the question remains: How should advisors and investors evaluate the potential of companies amid an AI era? Alger’s Dr. Ankur Crawford has thoughts.
Investing in Change
“We believe in investing in change,” said Dr. Crawford. “We believe that the greatest alpha and portfolios are going to come from companies that drive change, not necessarily react to it.”
As she noted, Alger’s philosophy is that companies driving change can fall into one of two different categories. The first category, high unit volume growth, refers to businesses that are seeing rapid growth or dominant market performance.
The second category, positive life cycle change, focuses on a different kind of change for a business model. As Dr. Crawford pointed out, positive life cycle change companies have already gone through the high unit volume growth phase and are now changing through a different environment. This could be from new company leadership, a favorable regulatory environment, or new innovations in the field.
The Next Industrial Revolution
In a recent poll, advisors were asked, “How would you describe your clients’ current interest in innovation and technology investing?” Fifty-eight percent of attendees responded “very high,” while 36% responded “moderate,” showcasing significant demand for innovation and technology exposure.
Dr. Crawford pointed out that if this poll were taken about six months ago, the results may have looked drastically different. This is because the market’s recognition of the importance of innovation is growing fast.
From a historical perspective, Dr. Crawford noted that each industrial revolution has led to the onset of new leaders in both market and technological dominance. As such, she predicts that AI will be the center point of the next industrial revolution.
“I cannot stress to you how incredibly important the implications and how big the implications are of living during an industrial revolution,” Dr. Crawford added. “Everyone needs to rethink valuation, the time in which this is going to happen, and the market structure.”
Potential Advantages of Active Management
AI may be creating new opportunities for active managers such as Alger. Broadly speaking, Dr. Crawford believes AI’s disruptive nature will continue to shift the investment landscape.
For years, many advisors and investors relied on overweighting in tried-and-true software companies to deliver results in their portfolios, as Dr. Crawford noted. However, she pointed out that AI has, and she believes will continue, to shift the growth and valuation parameters of companies across a variety of sectors, including the software industry.
This is where the expertise of active management can come into play. By levering the experience of portfolio teams, advisors and investors can seek to avoid companies whose valuations are at risk while still positioning for long-term results.
“One of the things I would argue is that increasingly this is a stock-picker’s market, which makes me really happy,” Dr. Crawford added.
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Disclosure Information
The views expressed are the views of Fred Alger Management, LLC (“FAM”) and its affiliates as of November 2025. These views are subject to change at any time and may not represent the views of all portfolio management teams. They 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.
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.
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.
Alger pays compensation to VettaFi to sell various strategies to prospective investors.