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Synthetic intelligence (AI) has grow to be an enormous headache for a lot of development shares in 2026. Principally, any tech firm promoting software program in any significant sense has been offered off, with AI fears returning in current days.
Nonetheless, the promoting has grow to be indiscriminate, with wheat getting tossed out with the chaff. The large alternative for long-term buyers then is to establish which firms will really profit from AI slightly 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.
Know-how ecosystem
The share I wish to spotlight is regulation enforcement tech agency Axon Enterprise (NASDAQ:AXON). I finished writing about this inventory for a number of months as a result of final August it soared above $850 and seemed extraordinarily overpriced.
I really took the chance to promote a number of shares round then to handle danger. Nonetheless, the inventory has since crashed 59% to $350!
At this value, I’m way 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 entails {hardware} (particularly Tasers and physique cameras).
These days, Axon not often sells a taser or physique digital camera 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 gives numerous software program providers).
Greater than 2.5bn proof recordsdata have been loaded into Axon Proof. And it’s rising constantly, with 60m+ hours of body-worn digital camera footage gathered from its newest two generations of physique cameras. This offers it an unlimited information benefit to create AI merchandise.
For an company to give up Axon’s software program, it must abandon the {hardware}, retrain officers on new gadgets 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 international sensor community, totally related and supercharged by AI. We are going to energy probably the most clever, related security gadgets globally“.
If this imaginative and prescient is realised (and administration has an awesome 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 12 months.
In the meantime, the corporate’s whole addressable market continues to broaden. Administration sees development alternatives with authorities, prisons, retailers (assume shoplifting epidemic), utility firms, 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 prospects go into it. Moderately than being a goal for disruption, we’re the disruptor.
CEO Rick Smith.
That mentioned, the inventory’s nonetheless not conventionally low-cost, even after the huge pullback. So any sudden slowdown in income might trigger an extra sell-off. Regulatory danger round AI use in police reviews might 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 kind of disconnect that ought to curiosity long-term buyers.
