That is a potential reasoning behind a violent stabbing, but not the only one. Knives have some symbolism among neo-Nazis, and it wouldn't be the first time that neo-Nazis had stabbed someone to death.
According to sites like KnifeDepot.com and MilitaryItems.com, daggers were carried by Nazi commanders and elite soldiers. Go on eBay, and you can find a whole section for Nazi-era "edged weapons," mostly daggers and bayonets. So if SW really revered Nazi ideology, it would be a pretty easy item for him to get ahold of as a collectible and carry around.
One of the best-known moments in the rise of the Third Reich was the Night of Long Knives, when Hitler ordered the purge of the "Brownshirts," a paramilitary faction within the Nazi Party. The Brownshirts were led by Ernst Rohm, who was gay (although Rohm was shot, not stabbed - "the night of long knives" prior to 1934 was an idiom for an act of vengeance). Rohm had opposed Hitler on part of the German penal code that made male homosexual acts illegal.
https://daily.jstor.org/ernst-rohm-the-highest-ranking-gay-nazi/
In 2009, a German police chief who opposed neo-Nazi groups was stabbed by a skinhead. The attacker was never apprehended, but the investigation pointed at links to a far-right neo-Nazi group:
http://www.abc.net.au/news/2008-12-20/stabbed-german-police-chief-vows-to-fight-neo-nazis/245830
In a 2016 riot between a neo-Nazi rally and counterprotesters in Sacramento, 10 people were hospitalized for stab wounds, most of them counter-protesters:
https://en.wikipedia.org/wiki/2016_Sacramento_riot
And if you search "stabbing hate crime," there are more than a million results, including:
- The stabbing last year of Richard Collins III, a black college student and Army officer; the suspect was allegedly a member of white supremacist groups on social media:
http://www.newsweek.com/fbi-alleged-alt-reich-college-stabber-racial-hatred-687584
- The fatal stabbing of Ricky Best and Taliesin Namkai-Meche and injury of Micah Fletcher on a Portland train last year:
https://en.wikipedia.org/wiki/2017_Portland_train_attack
- The (luckily non-fatal) stabbing attack of a 60-year-old man in Goshen, CA in October:
http://abc30.com/two-men-charged-with-hate-crime-after-stabbing-goshen-man/2564726/
So maybe SW had a sexual motivation, but given what's been revealed over the weekend, my guess is that he wasn't some tragic, conflicted, closeted man who was scared of his emotions. My guess is that, if it's proven he committed this murder - and I think it will be - it will be because he was mad his neo-Nazi friends called him a wannabe (as one news story reported; I don't remember which one, but it was linked in this thread already) and wanted to prove them wrong. My guess is the overkill was because he had never murdered anyone before and didn't know what he was doing. JMO.