Dr. Ankur Crawford, Executive Vice President, Portfolio Manager at Alger, sat down with ETF.com's Dave Nadig at the ETF Oasis from Future Proof to dig into the AI investing theme. From the CapEx spend to shrinking investment time horizons, this conversation touches on some of the hot topics in AI currently. The following is a transcript of their conversation.
"You've Got to Avoid the Roadkill"
Dave Nadig:So this one was tentatively called "An Engineer's Guide to the AI Trade," because Dr. Ankur Crawford, who's here from Alger… you've got a fan club? I didn't know this. Nobody's even clapping for me; I wanted to make that really obvious. But you actually know things about the space. You're not just picking stocks. You actually come from the engineering background of the whole semiconductor industry that is now driving the AI trade. We're going to get into a bunch of that.
Your actual job is you do run money around this theme, so people can go do that, but we're not going to be talking tickers here. I want to go back to a conversation you and I had ahead of this, where the fundamental thing that made my head crack open was: you don't invest in technology, you look for change. And I think that's such an interesting position to take in this world, which feels like nonstop change. I don't know about you, but I feel like the world changed just in the last two weeks since we talked. Like, the whole AI conversation has changed. Talk to me about what that means to focus on change, not winning technology.
Dr. Ankur Crawford:Yeah. So at Alger, we look for change. And the reason we look for change is that oftentimes, as human beings, we underestimate the impact of change. So it's difficult for people to think about big change that happens. Think about the iPhone. When we got the iPhone, BlackBerry said, "Oh, this isn't a BlackBerry killer, everyone's always going to want a keyboard."
Well, what happened? There was the introduction of the App Store. There was music. There was the introduction of Netflix on that, that you can watch on your phone. There was Uber. There were all of these different types of companies that were spawned off of the change in the mobile device. And so sometimes it is very difficult for people to imagine a world where change begets change. And when you can identify change in that way, oftentimes what happens is you find companies that can carry you for many, many years, because the earnings and the revenues kind of upside surprise.
Dave Nadig:So where I get confused on this is, not all change is good. And at the same time, it feels like change is asymptotically getting faster and faster, certainly in the AI space, in the semiconductor space. The stuff that we're building chips off of was technology that didn't exist ten years ago. How do you make those distinctions when you're out there looking for companies, looking for value, looking for the winners in this change race? How do you pick the superstars of next year from what we know is going to be some roadkill?
Dr. Ankur Crawford:Yeah. So the first part is, you've got to avoid the roadkill, right? You don't want to be anywhere near the roadkill. We avoided most of the software debacle that has happened over the last three years, in part because we identified three years ago that, with this change in AI, there were going to be a lot of different companies that were going to get disrupted inside of the software landscape. So we systematically sold most of our software holdings, keeping that idea in mind.
The way I think about the negative change is that, for every winner, there could be a potential incumbent that's a loser. So we're in this environment where the disruptors that we grew up with almost become the disrupted. You have to be incredibly careful to question almost every single business and every single business model, because none of them are safe right now.
Dave Nadig:How do we map that against the whole hyperscaler argument, right? When we talk about some of the early disruptors, to my mind we're talking about the top of the Nasdaq, the big tech names that we know. And I can see how some of them get disrupted. But at the same point, we're talking about such enormous numbers in the data‑center build‑out and the money being spent on chips, then it almost feels like a self‑fulfilling prophecy. How do these people get disrupted when they control the trillions of dollars that are being spent?
Dr. Ankur Crawford:It's not necessarily about capital that that disruption will come about. And, you know, we own Google, and we think that Google is going to cross this chasm. But the fact is that search and advertising is going to change in this new world, and it will change dramatically. So the question for Google is: will they be able to adapt to the new world?
Let's hypothetically say we have AI devices, and all of us have these little AI devices that follow along our day and give us feedback constantly, like, "you should have said this differently," "don't forget your husband's or your wife's birthday," "this is your list of tasks to do, you promised Dave you'd do this." All of a sudden, what does that do? Does it extract us away from the screen? Maybe. And if we're not on a screen, that's not an advertising dollar that they can actually monetize. Or what if we have bots that begin shopping for us? How does that change the advertising landscape? So that is a way that a disruptor can get disrupted, because if they don't act and they don't figure it out, they will be on the losing end of the stick.
Dave Nadig:Can you give us some examples of companies that you think have either figured this out early, and you're excited because you think they've gotten ahead of this, or companies that you think have just kind of missed the mark? Let's get this real concrete.
Dr. Ankur Crawford:In the advertising space?
Dave Nadig:Just anywhere in the domain that you're looking at: AI, semiconductors, how we're using AI and semiconductors, software. Where are you seeing the big opportunities, and where are you seeing the obvious roadkill to avoid?
Dr. Ankur Crawford:Yeah. So as I mentioned, software was the obvious roadkill. It becomes clear that when software begins to write software, innovation becomes exponential, because there is no limiting factor anymore. A machine is writing the software, so you can create almost anything. And so you take any digital asset, and it could be at risk.
Dave Nadig:That inevitably must shorten your investing time horizon dramatically. Because if there's no moat, which is sort of what I'm hearing you say, how can you have a ten‑year time horizon on anything?
Dr. Ankur Crawford:Well, what I would say is that there are different moats. You take an enterprise software company; historically they had the app, they had distribution, and then they had the stickiness factor. Right now, of those three moats, I would argue they have one and a half moats left, in that they still have the distribution and the stickiness factor still exists. People aren't going to just run out and rip out their enterprise software because somebody created a new software. So can they actually morph and cannibalize themselves, which may mean it might have a lower operating margin at the end of the day? And that's okay. They have to adapt to what is happening in AI.
Companies that will win in this… our thesis for a long time has been that there's $6 trillion of IT spending in any given year globally, and of that IT spend, about 50% used to go to software and services. And that spend to software and services is now going to hardware and networking. So the net benefit, in which we're only 10% of the spending as of 2023, now we're starting to see that shift already. You see it in the market caps, you see it in the revenues, where you have semiconductor companies, and even like Corning, which was kind of a left‑for‑dead fiberglass company, they're starting to see inflections, or they have been seeing inflections over the last three years in their growth rate, while software gone the other, has decelerated to kind of 8 to 10% type growth.
Dave Nadig:How do you avoid… there's a lot of discussion about the CapEx build‑out, a lot of discussion about the amount of money being spent on data‑center builds. I've heard from multiple people the comparison to the fiber build‑out being overdone, and that it's all going to be left for dead at some point, or so‑and‑so is going to build all these data centers, go bankrupt, and sell them to somebody else. How do you think about that? Because you are in the business of picking winners too. So how do you make that decision that this CapEx spend is sustainable and value‑add, and this CapEx spend is chasing and is never going to be relevant?
Dr. Ankur Crawford:Oh my gosh, Dave, I love this question, in part because I feel like the numbers are so big that it scares everyone. But what if I were to put it in this context? What if all of the technological improvement that we saw from 1998 till 2020 had to happen in five years? Because that is what is happening today. We are basically having a massive build of capacity, of intelligence, that is all happening in five years.
Now, the reason the fiber build‑out in 2000 was such an issue is because we had dreamed of what the internet could do for us. It was amazing. It was going to change everyone's world. You could order pet food and it could arrive at your house, that was Pets.com, right? Incredible! What a novel concept. We could have information at our fingertips. But who here remembers what 1998 was, when you actually tried to surf the internet on dial‑up? It was the worst experience ever. That was not going to add productivity.
And so we had baked in all of these dreams of what the internet would be, but it was going to take another decade to actually get to the point where we could take advantage of the internet. It required us to build a 1G network, then 2G, 3G, 4G, and 5G, and each of those network improvements gave us a step‑function up in the types of businesses that were created. So the iPhone would not have been as useful if we were on a dial‑up network.
Dave Nadig:Right.
Dr. Ankur Crawford:Right. There was no point to have apps in that case. So, with every improvement in the technology, we were able to build an app. But what happened in 2000 was we laid the fiber that you were going to use over the next 20 years, even when the technology was not ready. Right now, we are in a very, very different point in time. Have I told you my F1 analogy?
Dave Nadig:No.
Dr. Ankur Crawford:No? Okay. For those of you F1 lovers, I have an eight‑year‑old who loves F1. He likes Ferrari. But imagine you're an F1 engineer in 2000, and you dreamed up this incredible vehicle, and you're like, you know what, I'm going to win F1 for the next five years, because my vehicle is so incredibly efficient and amazing, and it's going to change the way we race. But you get to the race and your team put together four tires. So you're sitting there with a dream and no car. And that's what happened in 2000.
Now that car has been built. It's been built to an amazing capability, and the only thing you needed was the battery or gas. And that battery or gas is compute. So Jensen basically figured out how to use transformer technology in order to get a cheap enough compute that we could go. And so it is like all go now.
Dave Nadig:Help me think about time here, because what I'm hearing from you is: the problem we had before is the dream‑to‑reality gap, so ten years. And now the dream‑to‑reality gap takes an Uber ride from the airport, depending on what you're trying to fill. So you've shrunk that dream‑to‑reality time so tightly. How do you think about the time it takes for an investment to pay off? Sorry, this is boring and crass and practical, but you're buying a company today. Are you buying it for six months? Are you buying it for a year? Are you buying it until you get new information in the next day and a half? How do you think about that? Because I'm an old person, I used to think about this on a ten‑year timescale.
Dr. Ankur Crawford:Yeah. So I think the world is moving so fast that ten years is hard, because business models are changing at such a rapid rate. So ten years is no longer in the purview of investing, to be completely honest. I mean, if I could find a ten‑year stock, that would be great. I would say the appropriate time horizon is now 3 to 5 years.
I've always looked at things on a three‑year basis, because on a three‑year basis you can identify where you are in the cycle, and a five‑year basis allows you to understand how much duration they have for the business model. And especially right now, you have to question that five year, because, again, companies that are disruptors today may get disrupted. And let me give you the bear case on Nvidia: the bear case on Nvidia is that over the next five years their margins are going to come under pressure. So our research is focused on whether or not they're going to see margin pressure over the next five years and if it can impact them or not. Because that is what changes the duration of the earnings stream, and that changes the multiple.
Dave Nadig:But it also changes the rapidity with which capital gets applied. And a concern I have heard from some very active investors is that a lot of this innovation is going to happen in private, and there's no way to actually get exposure to it as an investor. How do you think about that? You're running a fund that has to invest primarily in public equities. How do you think about all of that development happening in Chinese labs, happening in private companies that may or may not come public?
Dr. Ankur Crawford:Well, we've been fortunate enough to actually participate in some of the private markets, in some of our '40 Act funds as well as our ETFs. And I would say we have some very interesting private companies in our portfolios, in order to take advantage of their growth trajectories. These companies used to be public companies; they used to go from two to 20 to 200, and we could all benefit from it. And so what we realized a few years ago is that, in order to benefit our clients, we needed to participate in these private markets with some of the best companies that we know. So we have been investing in the private markets, and there is a lot of disruption there.
But interestingly enough, there are also a lot of public companies. We own a company called Nebius, and Nebius, interestingly enough, owns a 25% stake in a company called ClickHouse. Now, if you're part of the private markets, ClickHouse is all the rage right now. And so a pretty significant part of their market cap can be tied to the private ownership that they have in four different assets. So that is another way to get exposure to some of what's happening in the private markets.
Dave Nadig:Right. We only have like a minute and a half left, and I had a question I wanted to ask you, which is a bit of a diversion. A bunch of advisors are out here; if you walk around this conference, every other booth is selling something AI for advisors, including Anthropic now with Claude for advisors. What piece of advice would you give a relatively normal human being who's not living in the AI trade every day like you are, when evaluating all the stuff we're all being sold that's got AI slapped on it right now? Is there a rule of thumb or an axiom you would give us?
Dr. Ankur Crawford:What I would advise everyone is: play with what you have. Don't be overwhelmed by it. It can be incredibly overwhelming. Don't be overwhelmed by it, actually try to build your own software. Try to go into Claude and say, "Hey, this is a pain point that I have, can you build me software to help my pain point?" See what happens. It's kind of exciting. I've done it, and it's fun; it keeps me up till 3:00 in the morning sometimes. But you've got to play with it. If you have a software vendor that's trying to sell you AI stuff, play with it, try it, see whether or not it adds productivity for you. I think you'll be surprised.
Dave Nadig:I think you had a good answer. Have more play is always a good answer. Thank you so much for joining us. Thanks, everyone. We'll be back with you.
[19:07] Dr. Ankur Crawford:Thanks, Dave.
Disclosures
The views expressed are the views of Fred Alger Management, LLC ("FAM") and its affiliates as of September 2026. These views are subject to change at any time and may not represent the views of all portfolio management teams. These views 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. Holdings are subject to change.
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. Private placements are offerings of a company's securities not registered with the SEC and not offered to the public, for which limited information may be available. Such investments are generally considered to be illiquid.
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.
Alger pays compensation to third party marketers to sell various strategies to prospective investors.
The following positions represent firm wide assets under management as of June 30, 2026: Alphabet, Inc., 4.73%; Nebius Group N.V., 4.49%; Anthropic, 0.63%; OpenAI Group PBC, 0.09%; Netflix, Inc., 0.21%; Uber Technologies, Inc., -0.03%; Corning, Inc., 0.05%; Apple, Inc., 4.13%; NVIDIA Corp., 10.12%; Liberty Media Corp., 0.02%, and Ferrari N.V., 0.01%.
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