Alger Small Cap Growth Fund Class A shares outperformed the Russell 2000 Growth Index in Q2 2026. Nebius Group, Astera Labs, and Twist Bioscience were key contributors, while Insmed, Planet Fitness, and Forte Biosciences were major detractors.
This pattern reads like the market is paying for bottlenecks, not broad “growth.” Names tied to AI/data-center infrastructure are attracting capital because they monetize capex regardless of which model or application wins; that makes them more resilient than downstream software or consumer growth stories if spending stays concentrated. The second-order risk is that any slowdown in hyperscaler capex or a digestion phase in AI buildouts would hit the whole complex at once, including adjacent networking/interconnect suppliers.
The laggards look like duration without a near-term re-rating trigger. Consumer-stable franchises can still de-rate when the market is in “show me” mode and wants visible same-store or margin acceleration rather than just quality. In biotech, the problem is even sharper: the market will discount pipeline timing and commercialization risk for months, so even intact fundamentals can underperform if there is no near-dated catalyst or if financing windows remain tight.
Contrarian take: the consensus may be overestimating how durable the small-cap growth rotation is. If the leadership is driven by a narrow set of AI infra names and a reopen-the-financing-window beta, it can reverse quickly on any capex pause, weaker traffic read, or disappointing clinical/commercial update. The key falsifier is not broad market weakness; it is evidence that these names stop seeing incremental estimate revisions over the next 1-2 earnings cycles.
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