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In recent times, Baillie Gifford US Progress Belief has made large returns from S&P 500 shares similar to Tesla and Nvidia. The FTSE 250-listed funding belief has additionally had success with some unlisted holdings, notably SpaceX.
In 2026 nevertheless, the expansion investor’s been selecting by the software program wreckage. The sector’s been hammered by fears that synthetic intelligence (AI) will eat software program. Within the six months to February, the software program and companies sector delivered the worst underperformance versus the S&P 500 in 30 years!
Nevertheless, Baillie Gifford US Progress Belief is satisfied that “some infants have been thrown out with the bathwater“. So which beaten-down S&P 500 inventory has it purchased?
Enter Axon
In February, the belief took the chance so as to add Axon Enterprise (NASDAQ:AXON) to its portfolio. Since August, this inventory’s crashed 52%.
Now, Axon isn’t precisely a family identify. And with a $33bn market-cap, it’s not very massive for the S&P 500 index.
For the file although, I’m very aware of the corporate, having first purchased shares a decade in the past. And after rising roughly 2,100% in 10 years (even after the latest pullback), this place has lengthy been amongst my largest holdings.
Whereas its identify may not be acquainted to most, Axon’s merchandise will likely be. It owns the Taser model behind the intense yellow stun-guns which might be synonymous with trendy regulation enforcement. They’ve saved numerous lives within the US by more and more changing bullets.
In the meantime, Axon’s military of auto and body-worn cameras seize unbelievable quantities of video proof, which is instantly despatched to, saved. and analysed in its cloud platform. As such, Axon operates one of many world’s largest video/knowledge repositories.
[Axon] combines units, software program and knowledge into an built-in system that turns into arduous to displace as soon as adopted.
Baillie Gifford.
Information benefit
Relatively than being threatened by AI, Axon’s utilizing the know-how to create cutting-edge software program merchandise. For instance, Draft One makes use of physique digital camera footage to robotically write preliminary police experiences, saving particular person officers big quantities of time.
There’s rising public stress to shift sources towards neighbourhood policing (deal with shoplifting, for instance). Axon’s efficiency-boosting Draft One ought to play a job right here, as its Workforce Mini body-cams are particularly for retail employees and safety guards. They enhance accountability, seize proof, and probably deter assaults.
In the meantime, Axon’s Fusus platform permits native companies to share their current CCTV feeds. This permits police to see inside shops throughout an lively crime.
In 2025, income rose 33% to $2.8bn, whereas bookings surged 46% to $7.4bn. Whole future contracted bookings hit $14.4bn, offering important income visibility for a few years to come back (contracts are sometimes 10 years now).
After just one 12 months, its suite of AI merchandise attracted $750m in bookings in 2025. Crucially, this income’s defensible as a result of upstart AI rivals can’t entry Axon’s real-world knowledge originating from automobiles, body-cams, drones, and extra.
As AI more and more commoditises software program growth, the businesses with defensible positions are people who personal the total stack, together with {hardware}, and we do.
Axon CEO Rick Smith.
Now, the largest danger here’s a excessive valuation (55 instances ahead earnings). If progress slows sooner than anticipated, the inventory could crumble. Laws in some US states might additionally gradual AI adoption amongst police.
Nevertheless, like Baillie Gifford, I feel the 52% dip-buying alternative is value assessing carefully.
