TSMC Surges on AI Demand Surge: Q1 2026 Update

In the first quarter of 2026, Sands Capital Management's Select Growth Strategy experienced a downturn, returning -12.9% compared to the Russell 1000 Growth Index's -9.8%. This underperformance stemmed from market volatility, heightened by AI advancements and geopolitical tensions, which led to a broad market risk-off sentiment.

The strategy's core focus on leading U.S. businesses and structural changes was challenged as the market shifted towards capital-intensive sectors, moving away from the asset-light, service-oriented businesses Sands Capital favors. Underweights in cyclical and defensive sectors also impacted relative results.

Conversely, Taiwan Semiconductor Manufacturing Company Limited (TSM) proved to be a strong performer for the strategy. TSMC's Chairman indicated strong end demand for AI accelerators from hyperscale customers. This confidence was underscored by a significant increase in the company's 2026 capital expenditure to $54 billion, surpassing consensus estimates.

TSMC projects AI-related revenue to grow at a 55 percent annualized rate through 2029, an upward revision from previous forecasts. The company's scale, yields, and ecosystem are seen as key differentiators in the high-performance GPU and CPU market. Future expansions in Arizona are also expected to address capacity concerns.