AI Spending Boom Fuels Earnings-Driven Market Rally

Core Insights - The market surge in the previous year was primarily driven by AI spending and infrastructure development, rather than mere investor sentiment [1][2] - Earnings growth accounted for 13.6 percentage points of the S&P 500 Index's 17.9% return in 2025, indicating that companies generated more profits rather than investors simply paying higher prices for existing profits [2] Investment Landscape - Alger identifies approximately $4.2 trillion in annual private nonresidential fixed investment, which constitutes about 14% of U.S. GDP, with capital being deployed across various sectors including data centers and power infrastructure [3] - The Alger AI Enablers & Adopters ETF (ALAI) targets a diverse range of companies within the AI infrastructure ecosystem, suggesting a multi-trillion dollar spending wave beyond traditional tech names [4] Sector Performance - The projected U.S. AI infrastructure investment is estimated to reach around $10 trillion, with significant initiatives from major companies like Apple Inc. and collaborations such as Project Stargate over the next four years [6] - Power generation and electrical components are critical for building AI data centers, as AI queries require approximately ten times more computing power than traditional searches, leading to increased demand for electricity and cooling systems [7] Portfolio Composition - ALAI's portfolio includes major players like Nvidia Corp., Microsoft Corp., and Meta Platforms Inc., as well as lesser-known infrastructure companies such as Nebius Group and Talen Energy Corp [5][8] - The fund captures a wide range of companies supplying the necessary physical infrastructure to support AI workloads, indicating a comprehensive approach to investment in the AI sector [8] Market Trends - Communication services and information technology sectors have led the S&P 500 Index performance for three consecutive years, with industrials also showing strong performance, reflecting a market preference for companies engaged in capital spending themes beyond just AI [9]