Small-Cap Funds Lag as AI Stocks Lead Rally

Published: 2026-09-04 06:06:24 |

Virtus KAR small-cap funds lagged their benchmarks in the second quarter of 2026 as market leadership narrowed around artificial intelligence infrastructure. The Virtus KAR Small-Cap Growth Fund returned 7.83% for Class I shares, compared with a 25.71% gain for the Russell 2000 Growth Index. The Virtus KAR Small-Cap Value Fund returned 7.66%, versus 17.19% for the Russell 2000 Value Index. Both funds were hurt as investors favoured companies viewed as bottlenecks in the AI data-centre supply chain. High-beta, lower-quality and unprofitable small-cap stocks also led the broader rally, increasing the performance gap with traditional value and more diversified active strategies. The growth fund added Figure Technology Solutions and sold NVE Corporation during the quarter. Outside AI, Cheesecake Factory showed resilient comparable-store sales, while water-metering technology company Badger Meter remained a strong long-term holding. For crypto traders, the report has no direct implications for Bitcoin, Ethereum or other digital assets. It offers a broader risk-market signal: sustained AI infrastructure momentum could support speculative technology sentiment, while concentrated leadership and elevated volatility may increase sensitivity across high-beta assets.

Neutral

The news has no direct price impact on any cryptocurrency because neither fund report discusses digital assets, blockchain networks or crypto-related companies. In the short term, continued enthusiasm for AI infrastructure may support broader risk appetite and speculative technology trading, but this does not establish a clear bullish or bearish signal for Bitcoin, Ethereum or altcoins. The main market takeaway is increased concentration and volatility. If AI-linked equities continue to attract capital, crypto traders may see stronger correlations between high-beta technology stocks and speculative tokens. However, a reversal in AI momentum could produce wider risk reduction across both markets. Over the long term, the funds’ underperformance highlights the risks of concentrated market leadership rather than a fundamental change in crypto valuations. Historical reactions to similar equity-sector rotations suggest that crypto prices are more likely to follow macro liquidity, interest-rate expectations and overall risk sentiment than this specific fund commentary.