Fred Alger Management released the fourth-quarter 2025 investor letter for its Alger Small Cap Focus Fund. The U.S. equity market finished the quarter strongly, with the S&P 500 rising 2.7%. Corporate earnings that exceeded expectations, the Federal Reserve's continued easing of interest rates, and a resilient macroeconomic environment supported investor optimism. Additional clarity on trade policy also provided support.
Beneath the index level, divergence increased during the quarter. Enthusiasm for AI investment faced growing doubts due to bottlenecks, financing challenges, and uncertainty over return generation. The firm noted it continues to observe long-term trends that offer attractive opportunities for small-cap stocks.
In the fourth quarter of 2025, the Fund's Class A shares outperformed the Russell 2000 Growth Index. The Utilities and Financials sectors contributed to the Fund's relative performance, while the Consumer Discretionary and Information Technology sectors detracted from it.
The investor letter highlighted stocks including Nebius Group N.V. (NASDAQ:NBIS). Nebius Group, a technology company headquartered in Amsterdam, the Netherlands, saw a one-month return of 16.63%. Over the last 52 weeks, its shares gained 201.69% in value. On January 16, 2026, Nebius Group stock closed at $108.73 per share, giving it a market capitalization of $27.379 billion.
Regarding Nebius Group, the fund stated in the letter: "Nebius Group N.V. (NASDAQ:NBIS) is a provider of AI-focused cloud infrastructure, operating GPU compute capacity across Europe and expanding in the U.S. We view the company as a differentiated 'neocloud' beneficiary of accelerating AI adoption, as demand for high-quality GPU compute continues to outstrip available supply of chips, power, and data center capacity. Nebius already operates a first-party data center in Finland and has deployed GPU capacity in Paris, while adding U.S. capacity through a Kansas City, Missouri deployment and a new data center build-out in New Jersey. During the quarter, shares detracted amid a broader selloff in AI infrastructure-related equities as investors grew more concerned about the 'circularity' of AI ecosystem financing and the durability of AI infrastructure spending. Despite near-term volatility, Nebius continues to sign large, long-term agreements with tier-one customers, including multi-year AI infrastructure contracts with major cloud service providers, improving revenue visibility as new capacity comes online."