Basic example not correctly limiting items in DOM

I built a simple demo (https://codesandbox.io/s/vue-template-r2u6h?fontsize=14) and I've noticed that if I inspect the DOM, I've got 900 items rendered immediately before any scrolling is done. Is this expected? The link above should let you see the full code which is very much like the initial example given, except I'm defining the items in a loop to give me a large set of data.