Sands Capital Management, LLC released its Q1 2026 investor letter for its “Select Growth Strategy”. A copy of the letter is available to download here. Select Growth mainly targets leading U.S. businesses, driving positive structural changes. U.S. large-cap growth stocks fell in the first quarter. Sharp dispersion driven by AI advances marked the quarter, but late in the quarter, geopolitical tensions with Iran caused a broad-based risk-off move across the market. AI continued to influence market behavior, with AI-related investments increasing dispersion and shifting capital to asset-heavy sectors benefiting from AI infrastructure demand, which faced less disruption risk. While equities struggled, corporate fundamentals remained strong. Select Growth underperformed the Russell 1000 Growth Index, returning -12.9% vs. -9.8%, due to concerns about AI disruption affecting sector and stock choices. The Strategy’s focus on higher-growth, asset-light, service businesses faced challenges as markets rotated toward more capital-intensive, lower-risk sectors. Underweights in cyclical and defensive sectors slightly hurt relative results amid the broader market shift. In addition, please check the Strategy’s top five holdings to know its best picks in 2026.
In its first-quarter 2026 investor letter, Sands Capital Select Growth Strategy highlighted stocks like Microsoft Corporation (NASDAQ:MSFT). Microsoft Corporation (NASDAQ:MSFT) is a multinational software company that develops and supports software, services, devices, and solutions, holding dominant positions in software, cloud infrastructure, generative AI, and gaming. On June 8, 2026, Microsoft Corporation (NASDAQ:MSFT) closed at $411.74 per share. One-month return of Microsoft Corporation (NASDAQ:MSFT) was 0.97%, and its shares lost 12.57% over the past 52 weeks. Microsoft Corporation (NASDAQ:MSFT) has a market capitalization of $3.06 trillion.
Sands Capital Select Growth Strategy stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q1 2026 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) reported revenue and operating income above consensus expectations, but shares declined as Azure growth met, rather than exceeded, investor expectations. Azure grew 38 percent year over year on a constant currency basis, consistent with recent quarters, and guidance did not signal near-term reacceleration. Capacity constraints, rather than demand, continue to limit Azure growth. Microsoft is prioritizing compute for internal AI workloads, including Copilot, which reduces near-term availability for external customers. This reflects strong underlying AI demand and reinforces Microsoft’s positioning, even as it constrains reported growth. We see potential for acceleration as capacity expands. Additionally, Microsoft’s leadership in agentic AI development represents incremental upside that we believe is not yet reflected in expectations.”
Microsoft Corporation (NASDAQ:MSFT) ranks second on our list of 40 Most Popular Stocks Among Hedge Funds. According to our database, 282 hedge fund portfolios held Microsoft Corporation (NASDAQ:MSFT) at the end of the first quarter, compared to 312 in the previous quarter. In the third quarter of fiscal 2026, Microsoft Corporation (NASDAQ:MSFT) reported revenue of $82.9 billion, marking an increase of 18% and 15% in constant currency. While we acknowledge the risk and potential of Microsoft Corporation (NASDAQ:MSFT) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Microsoft Corporation (NASDAQ:MSFT) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Microsoft Corporation (NASDAQ:MSFT) and shared the list of best AI stocks to buy in June. In addition, please check out our hedge fund investor letters Q1 2026 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.
