Sands Capital’s Q1 2026 letter shows AI-driven dispersion hurt asset-light growth stocks, with TSM benefiting from infrastructure demand.
Taiwan Semiconductor Manufacturing Company (TSM) reinforced its leadership in AI infrastructure during Q1 2026, as demand for capital-intensive sectors surged. Sands Capital’s Select Growth Strategy underperformed the Russell 1000 Growth Index, returning -12.9% versus -9.8%, due to its focus on asset-light, service-oriented businesses amid a market rotation toward lower-risk, AI-driven sectors.
The quarter saw sharp dispersion in U.S. large-cap growth stocks, driven by AI advancements and late-quarter geopolitical tensions with Iran. While equities broadly struggled, AI-related investments redirected capital to sectors less vulnerable to disruption, benefiting companies like TSM. The strategy’s underweights in cyclical and defensive sectors further weighed on relative performance.
Corporate fundamentals remained resilient despite market volatility, though Sands Capital’s holdings faced headwinds from the shift toward asset-heavy AI beneficiaries.