The last few weeks have been quite volatile for the US stock market. While index investors may not have felt much of a pinch, some stock pickers have been hit with some pretty massive downward swings from popular growth stocks.
Microsoft shares have dropped by over 10% since 2026 kicked off. Palantir has seen a similar stumble. And Axon Enterprise (NASDAQ:AXON) has also been caught in the crossfire.
So, here’s what legendary investor Warren Buffett recommends for times of volatility.
What’s driving volatility?
In most cases, the recent pullback in stock prices came after Microsoft announced its latest earnings. The tech giant ended up missing some key analyst targets, particularly when it comes to its AI tools.
Rising AI scepticism seems to be moving across the wider tech industry. And this negativity also appears to be spreading to other sectors as well, particularly among growth stocks that are trading at lofty valuations.
Axon Enterprise is perhaps a prime example of this. Even after taking a double-digit tumble, the growth stock continues to trade at a lofty forward price-to-earnings ratio of 58. And with the shares seemingly priced to perfection, even a small dip in investor sentiment could have an outsized negative impact on its price.
What would Buffett do?
As a famous value investor, Buffett has rarely paid such premium valuations even for high-quality companies. Nevertheless, his timeless advice for dealing with stock market volatility remains just as applicable: “If a business does well, the stock eventually follows.”
Rather than panicking about what the share price is doing, Buffett has always remained laser-focused on what the underlying business is up to. Why? Because if the company is actually secretly thriving while the price is in freefall, that’s when tremendous buying opportunities emerge.
Let’s look again at Axon.
The public safety technology group has spent decades building a hardware & software ecosystem for law enforcement, covering body & dash cameras, non-lethal taser weapons, evidence management solutions, and criminal investigation tools.
So much so that over 18,000 agencies worldwide rely on its technology. And this dominant status has proven to be a powerful competitive advantage.
What could go wrong?
The combination of mission-critical products with dominant industry status is why Axon shares have long traded at a premium valuation. That hasn’t changed in 2026, and it suggests the recent volatility could present a buying opportunity.
However, it’s important to recognise there’s still substantial risk. Axon has done an excellent job of securing market share in the US. But with this market potentially getting saturated, the firm is increasingly relying on international markets to fuel growth.
So far, the group’s international expansion seems to be progressing well. But it comes with a lot of added complexities. Different regulatory jurisdictions introduce region-specific challenges for the software side of the business, creating headwinds that local rivals already have experience in navigating.
So where does that leave investors? As a shareholder, my long-term bullish stance on Axon remains intact. But I’m not blind to the fact that any short-term hiccups or wider stock market pessimism could trigger another round of downward volatility. That’s why I’m waiting for a better price to emerge before buying more. Luckily, there are plenty of other US growth stocks to explore right now.
