How ATFV Navigates the AI Infrastructure Boom

As markets change, investors are increasingly looking toward high-conviction, active vehicles like the Alger 35 ETF (ATFV C+) to find companies adapting to disruptive shifts and creating lasting value. ATFV seeks to capitalize on major technological transformations, including the rapid expansion of AI infrastructure.In the recent webcast, Honoring the Past, Looking to the Future, Alger CEO and Chief Investment Officer Dan Chung explained how ATFV’s unconstrained investment mandate allows it to pursue high-impact opportunities across the market spectrum, uncovering emerging companies that fall outside conventional benchmark indexes. This flexible framework specifically targets businesses positioned to benefit from surging global demand for semiconductors, data centers, networking equipment, and other critical AI-enabling technologies.Key Takeaways The Alger 35 ETF (ATFV) utilizes an active, high-conviction approach to target companies positioned for structural growth and disruptive change.   Alger leadership views the current artificial intelligence buildout as a generational investment cycle akin to the post-WWII economic mobilization.   The fund leverages an all-cap framework and a strict risk-reward evaluation process to identify next-generation market leaders before they enter major indexes. Macroeconomic Drivers: The Scale of AI Infrastructure SpendingBeyond its investment strategy, ATFV reflects a lasting tribute to the 35 Alger team members who lost their lives in the September 11 attacks. The fund bears their memory through its name and by allocating part of its management fees to charitable initiatives. Chung, who assumed the CIO role following the tragedy, emphasizes that this tribute drives a deep institutional commitment to the strategy’s performance. From a macroeconomic perspective, Alger’s investment thesis rests on an unprecedented surge in business spending. A surge that is currently outpacing overall gross domestic product growth.  “Everyone’s talking about AI, but we want to emphasize AI is a part of a bigger trend of business spending that is outpacing overall economic growth and is in fact driving a stronger economy than I think many had expected,” said Chung. Technology equipment spending has exploded by 28% year-over-year, supported by a massive 10.5 trillion pipeline of announced non-residential fixed investment in the U.S. Chung draws a historical parallel between the current AI market trajectory and the early internet era following the 1994 Netscape IPO. This suggests that the market is only in a phase comparable to early 1998. Crucially, unlike the debt-fueled fiber-optic buildout of the late 1990s, today’s AI hyperscalers remain highly profitable. They are now generating between 800 billion and 900 billion in operating cash flow before capital expenditures.Inside the ATFV Portfolio: All-Cap Flexibility and Tech Bottlenecks To capitalize on this cycle, ATFV maintains an all-cap flavor with a median market capitalization of approximately 147 billion. This strategy offers distinct exposure compared to ultra-concentrated mega-cap funds. It’s structural flexibility enables the management team to target supply-constrained bottlenecks, such as high-bandwidth memory and optical networking. A prime example of this active approach is the fund’s investment in Nebius (NBIS), an AI cloud data center provider that has surged 20-fold since its initial small-cap acquisition. Nebius also holds a 25% stake in Click House, a company that Chung said we will be hearing about soon. Its cutting-edge database technology is well-positioned for the low-latency demands of emerging agentic AI applications. Beyond pure tech, the fund is actively tracking AI’s expansion into hard science. Already, it has begun to transform molecule discovery, patient management, and insurance delivery systems.  Investors must also look beyond the initial phase of AI model training to capitalize on the next wave of commercial deployment. The market is rapidly transitioning toward agentic AI — autonomous AI agents interacting in real time with billions of users. This shift exposes critical infrastructure bottlenecks, particularly the need for low-latency, persistent memory database technology.Managing Risk and Private Market Exposure in Active Growth ETFs Beyond public equities, ATFV selectively accesses private markets, holding positions in prominent firms like Anthropic while actively evaluating opportunities in SpaceX. Every portfolio allocation is governed by rigorous valuation disciplines, including scenario analysis and a strict scorecard system. The investment team requires a positive risk-reward ratio of at least two-to-one or three-to-one upside relative to downside risk before initiating a position. This dual focus on rigorous risk management and unconstrained discovery positions the fund to navigate the evolving tech landscape as AI transitions from model training to real-world deployment.Spotting Signs of Trouble in AI As tech giants and disruptors pour historic amounts of capital into AI, investors naturally wonder how to separate secular winners from overvalued risks. To address this, the session closed by looking at the exact sell signals and portfolio allocation metrics that Alger monitors to safeguard client capital.  Cinthia Murphy, director of research at TMX VettaFi asked Chung what specific warning signs or signals of trouble would give him pause regarding the massive AI growth narrative, especially given the immense capital being spent by these companies. Rather than getting swept up in market euphoria, Chung emphasized that ATFV relies on a deeply entrenched, quantitative framework to manage downside risk:  “There’s a discipline at Alger about both the valuation but also like a scorecard and they need to hit their scorecards and basically earn A’s to be in the Alger 35,” said Chung. “We can’t have a hundred names and a lot of names that we’re just sort of hanging out with.”  For more news, information, and analysis, visit the Equity ETF Content Hub.