The first quarter of 2026 presented a dynamic and challenging landscape for U.S. small-cap equities, marked by significant investor sentiment shifts and rapid market rotations, as the Wasatch Core Growth Fund—Investor Class concluded the period with a -5.57% return, lagging the Russell 2000 Growth Index's -2.81% decline.
Amidst this volatility, certain holdings within the Wasatch Core Growth Fund demonstrated notable resilience and growth. Nova Ltd. and Camtek Ltd., both prominent players in the semiconductor sector, emerged as key contributors to the fund's performance, propelled by the escalating demand for artificial intelligence technologies. Similarly, Everus Construction Group, Inc. reported strong results, showcasing a record year-end backlog and exceeding profit and revenue growth expectations, largely attributed to the robust demand from AI-related data centers. Recognizing the transformative impact of AI, Wasatch Global Investors strategically refined its portfolio, reallocating capital within its software holdings to prioritize companies with strong competitive advantages and proprietary data, believing these are best positioned to capitalize on or withstand AI-driven changes. Conversely, Shift4 Payments, Inc. was among the primary detractors, experiencing a sell-off influenced by the broader AI disruption debate following a significant acquisition in 2025.
In summary, the Wasatch Core Growth Fund's performance in Q1 2026 reflects a period of market re-evaluation, where the pervasive influence of artificial intelligence played a decisive role. The fund's strategic adjustments underscore a proactive approach to evolving market dynamics, emphasizing long-term value creation through thoughtful selection and positioning. Investing in companies that are at the forefront of technological innovation and possess robust competitive advantages is crucial for navigating modern market complexities and achieving sustainable growth. This forward-looking strategy not only aims to mitigate risks but also to unlock opportunities in an ever-changing economic environment, demonstrating a commitment to identifying and fostering future industry leaders.
