Sands Capital, an investment management company, released its “Sands Capital Select Growth Strategy” Q1 2025 investor letter. A copy of the letter can be downloaded here. Select Growth Strategy primarily targets U.S. companies that are leading the way in crucial areas of positive structural transformation within the economy. U.S. growth equities, tracked by the Russell 1000 Growth Index, experienced their poorest quarterly performance since 2022, significantly lagging behind U.S. value equities, represented by the Russell 1000 Value Index, in the widest gap observed since 2001. The strategy slightly underperformed the Russell 1000 Growth Index in the quarter. You can check the fund’s top 5 holdings to know more about its best picks for 2025.
In its first-quarter 2025 investor letter, Sands Capital Select Growth Strategy highlighted stocks such as Snowflake Inc. (NYSE:SNOW). Snowflake Inc. (NYSE:SNOW) offers a cloud-based data platform to support various organizations. The one-month return of Snowflake Inc. (NYSE:SNOW) was 24.77%, and its shares gained 53.41% of their value over the last 52 weeks. On June 2, 2025, Snowflake Inc. (NYSE:SNOW) stock closed at $210.17 per share, with a market capitalization of $70.13 billion.
Sands Capital Select Growth Strategy stated the following regarding Snowflake Inc. (NYSE:SNOW) in its Q1 2025 investor letter:
“We sold Snowflake Inc. (NYSE:SNOW) to manage exposure to software and higher volatility holdings. We chose to exit the business because it became our lowest-conviction software holding after our research uncovered a potential weakening fit with our third investment criterion: significant competitive advantage/unique business franchise. Snowflake remains the most performant cloud data warehouse (CDW), and its key advantages persist in its core market. However, the company’s competition has narrowed the gap in recent years. This dynamic, in isolation, would not likely merit a sale. However, the rapid rise of AI could be shifting the plane of competition to favor data platform vendors with stronger AI offerings as enterprises prioritize AI infrastructure investments.
Our research has indicated that this is driving a convergence between AI and CDW platforms, with Snowflake being forced to catch up to competitors with head starts in building data platforms specifically catering to AI. Our concern is that Snowflake will cede market share to both the cloud hyperscalers and private competitors with these head starts while seeing profit margins contract as it invests to accelerate the development of its AI capabilities. Snowflake also has a new CEO at the helm who needs to reorient not only the product offering but also how the platform is sold, given new user personas and more technical products. In our view, this dynamic may slow the long-term earnings trajectory of the business, and it introduces a level of uncertainty that does not justify the current valuation. For this reason, we decided to exit our position in favor of higher-conviction holdings.”
A software engineer at work, surrounded by a wall of computer monitors connected to a ‘Data Cloud’ platform.
Snowflake Inc. (NYSE:SNOW) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 94 hedge fund portfolios held Snowflake Inc. (NYSE:SNOW) at the end of the first quarter, which was 85 in the previous quarter. In the first quarter of fiscal 2026, Snowflake Inc.’s (NYSE:SNOW) product revenue increased 26% year-over-year to $997 million. While we acknowledge the potential of Snowflake Inc. (NYSE:SNOW) 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 undervalued AI stock set for massive gains.
In another article, we covered Snowflake Inc. (NYSE:SNOW) and shared the list of stocks Jim Cramer recently discussed. In the first quarter of 2025, Artisan Mid Cap Fund initiated a garden position in Snowflake Inc. (NYSE:SNOW). 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.
