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Multiselect dropdown list has performance issue when lot of items are selected

Multiselect dropdown list has very slow performance, when it contains lot of selected items. The issue is demonstrated by this example, where there are 2000 items selected: https://stackblitz.com/edit/abudgu. In my computer, rendering the list takes around 10 seconds and during that time the browser is frozen.

The list can easily do more than 10000 available items without performance issue, but the problem arises when the number of selected items increase. When testing with different number of items, I get the following results:

1000 items -> 2500 ms

2000 items -> 9500 ms

3000 items -> 22400 ms

This shows a clear O(n^2) time complexity pattern (in this case quadratic time), which indicates that there is a very inefficient algorithm in use somewhere. I'd assume that the multiselect list functionality can be achieved with algorithms having time complexity close to O(n).