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Synthetic intelligence (AI) has turn into an enormous headache for a lot of development shares in 2026. Principally, any tech firm promoting software program in any significant sense has been bought off, with AI fears returning in current days.
Nonetheless, the promoting has turn into indiscriminate, with wheat getting tossed out with the chaff. The massive alternative for long-term buyers then is to determine which corporations will truly profit from AI quite than be destroyed by it.
Right here’s one S&P 500 inventory that I believe is now oversold on AI fears and value contemplating.
Expertise ecosystem
The share I wish to spotlight is legislation enforcement tech agency Axon Enterprise (NASDAQ:AXON). I ended writing about this inventory for a number of months as a result of final August it soared above $850 and appeared extraordinarily overpriced.
I truly took the chance to promote a number of shares round then to handle threat. Nonetheless, the inventory has since crashed 59% to $350!
At this value, I’m far more bullish from a long-term perspective. As a result of whereas software program now accounts for 43% of Axon’s whole income, it’s a part of an ecosystem that includes {hardware} (particularly Tasers and physique cameras).
These days, Axon not often sells a taser or physique digicam as a one-time buy. Roughly 90% of latest bookings are multi-year subscription bundles the place companies additionally use Axon Proof (its cloud storage platform that provides varied software program providers).
Supply: Axon Enterprise.
Greater than 2.5bn proof recordsdata have been loaded into Axon Proof. And it’s rising repeatedly, with 60m+ hours of body-worn digicam footage gathered from its newest two generations of physique cameras. This provides it an unlimited information benefit to create AI merchandise.
For an company to stop Axon’s software program, it must abandon the {hardware}, retrain officers on new units and software program, and migrate large quantities of delicate authorized proof elsewhere.
A defensible ecosystem supercharged by AI
Will that occur? Personally, I don’t assume so. In reality, I solely see AI making Axon stronger. It’s already taken in practically $1bn in bookings from new AI merchandise.
CEO Rick Smith sees the corporate turning into “the supplier of the world’s largest world sensor community, totally linked and supercharged by AI. We are going to energy probably the most clever, linked security units globally“.
If this imaginative and prescient is realised (and administration has an incredible monitor document of execution), Axon’s market-cap ought to be a lot greater than $31bn in 10 years’ time. Its future contracted bookings swelled to $14.4bn final yr.
In the meantime, the corporate’s whole addressable market continues to increase. Administration sees development alternatives with authorities, prisons, retailers (assume shoplifting epidemic), utility corporations, healthcare suppliers, and extra.
[Axon] is an interconnected ecosystem of {hardware}, software program, and cloud providers embedded in a closely regulated business via long-term authorities contracts. That’s not only a enterprise mannequin, it’s an ecosystem that grows much more precious the deeper our clients go into it. Relatively than being a goal for disruption, we’re the disruptor.
CEO Rick Smith.
That stated, the inventory’s nonetheless not conventionally low-cost, even after the large pullback. So any sudden slowdown in income may trigger an extra sell-off. Regulatory threat round AI use in police stories may additionally improve.
Stepping again although, what we see right here is that Axon’s underlying enterprise is getting stronger whereas its share value is crashing. That’s the form of disconnect that ought to curiosity long-term buyers.
