Alger Fund Beats S&P 500 in Q2 on AI Infrastructure Bets

Class A shares of the Alger Dynamic Opportunities Fund beat the S&P 500 Index in the second quarter of 2026. The benchmark returned 15.2% in the period, its strongest quarter since 2020. Overweight positions in Information Technology and Industrials, plus strong earnings from AI-linked holdings, drove the fund's relative gain, according to the fund's commentary.

Information Technology and Industrials were the fund's two largest sector weightings, and both contributed to relative performance. The largest sector overweight was Industrials. The largest underweight was Financials, a sector that detracted alongside Health Care.

Two of the fund's long positions sit at the hardware and capacity layer of AI computing. Astera Labs makes the connectivity chips that manage data traffic inside AI servers. Nebius Group operates GPU cloud infrastructure. Neither name designs the headline AI processors; both sit in the infrastructure that makes those processors usable. The fund expects both to benefit from accelerating AI infrastructure demand and hyperscale cloud expansion.

AlphaScala's scoring puts both names in mixed territory, with Nebius Group at 53/100 and Astera Labs at 49/100.

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The export-control environment is the risk cutting across the portfolio. Data centers running AI workloads lean on the most advanced chips, so a restriction on those chips caps how much capacity an operator with China exposure can sell. The same logic runs in reverse for the fund's AI longs: a slowdown in hyperscale capital spending would squeeze the demand driving Nebius and Astera. A sustained AI build-out keeps the thesis working; a capex pullback breaks it.

Fred Alger Management, the privately held $27.4 billion growth equity manager behind the fund, has run the strategy for six decades.

GDS Holdings, a China data center operator in the fund, was among the quarter's detractors, pressured by concerns that U.S. export restrictions on advanced chips would restrain its growth, the commentary said.