Here's Why Investors Rotated Away from Xometry (XMTR)

Fred Alger Management, an investment management company, released its “Alger Small Cap Focus Fund” first quarter 2025 investor letter. A copy of the letter can be downloaded here. Changing trade, monetary, and fiscal policies increased volatility in US stocks. The emergence of artificial intelligence (AI) models from China added to the uncertainty. Against this backdrop, the class A shares of the fund underperformed the Russell 2000 Growth Index. The Communication Services and Energy sectors contributed to the relative performance of the fund in the quarter, while the Health Care and Information Technology sectors detracted. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025.

In its first-quarter 2025 investor letter, Alger Small Cap Focus Fund highlighted stocks such as Xometry, Inc. (NASDAQ:XMTR). Xometry, Inc. (NASDAQ:XMTR) is an AI powered online marketplace that helps buyers to source custom-manufactured parts and assemblies. The one-month return of Xometry, Inc. (NASDAQ:XMTR) was -14.01%, and its shares gained 37.32% of their value over the last 52 weeks. On April 17, 2025, Xometry, Inc. (NASDAQ:XMTR) stock closed at $22.04 per share with a market capitalization of $1.109 billion.

Alger Small Cap Focus Fund stated the following regarding Xometry, Inc. (NASDAQ:XMTR) in its Q1 2025 investor letter:

"Xometry, Inc.'s (NASDAQ:XMTR) AI-enabled technology platform is powered by proprietary machine learning algorithms, resulting in a sophisticated marketplace for manufacturing. Although the company reported strong fiscal fourth-quarter results that exceeded analyst estimates, shares fell after management guided to a modest loss for fiscal 2025 on an earnings-before-interest taxes-depreciation-and-amortization (EBITDA) basis. Additionally, we believe shares detracted from performance amid a broader sell-off affecting high-growth, unprofitable companies, as investors rotated away from stocks that performed strongly in 2024. Additionally, the company secured several new cloud contracts, including five with major insurers, underscoring strong market demand for its offerings. Given the strong operating results, shares contributed to performance during the quarter."

Xometry, Inc. (NASDAQ:XMTR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 14 hedge fund portfolios held Xometry, Inc. (NASDAQ:XMTR) at the end of the fourth quarter which was 7 in the previous quarter. While we acknowledge the potential of Xometry, Inc. (NASDAQ:XMTR) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

In another article, we covered Xometry, Inc. (NASDAQ:XMTR) and shared the list of best 3D printing and additive manufacturing stocks to buy. In Q4 2024, Xometry, Inc. (NASDAQ:XMTR) contributed to Alger Small Cap Growth Fund's performance after reporting strong results. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.