Artificial intelligence (AI) has become a huge headache for many growth stocks in 2026. Basically, any tech company selling software in any meaningful sense has been sold off, with AI fears returning in recent days.
However, the selling has become indiscriminate, with wheat getting tossed out with the chaff. The big opportunity for long-term investors then is to identify which companies will actually benefit from AI rather than be destroyed by it.
Here’s one S&P 500 stock that I think is now oversold on AI fears and worth considering.
Technology ecosystem
The share I want to highlight is law enforcement tech firm Axon Enterprise (NASDAQ:AXON). I stopped writing about this stock for a few months because last August it soared above $850 and looked extremely overpriced.
I actually took the opportunity to sell a few shares around then to manage risk. However, the stock has since crashed 59% to $350!
At this price, I’m much more bullish from a long-term perspective. Because while software now accounts for 43% of Axon’s total revenue, it’s part of an ecosystem that involves hardware (specifically Tasers and body cameras).
Nowadays, Axon rarely sells a taser or body camera as a one-time purchase. Roughly 90% of new bookings are multi-year subscription bundles where agencies also use Axon Evidence (its cloud storage platform that offers various software services).
More than 2.5bn evidence files have been loaded into Axon Evidence. And it’s growing continuously, with 60m+ hours of body-worn camera footage gathered from its latest two generations of body cameras. This gives it an enormous data advantage to create AI products.
For an agency to quit Axon’s software, it would have to abandon the hardware, retrain officers on new devices and software, and migrate huge amounts of sensitive legal evidence elsewhere.
A defensible ecosystem supercharged by AI
Will that happen? Personally, I don’t think so. In fact, I only see AI making Axon stronger. It’s already taken in nearly $1bn in bookings from new AI products.
CEO Rick Smith sees the company becoming “the provider of the world’s largest global sensor network, fully connected and supercharged by AI. We will power the most intelligent, connected safety devices globally“.
If this vision is realised (and management has a great track record of execution), Axon’s market-cap should be much higher than $31bn in 10 years’ time. Its future contracted bookings swelled to $14.4bn last year.
Meanwhile, the company’s total addressable market continues to expand. Management sees growth opportunities with government, prisons, retailers (think shoplifting epidemic), utility companies, healthcare providers, and more.
[Axon] is an interconnected ecosystem of hardware, software, and cloud services embedded in a heavily regulated industry through long-term government contracts. That’s not just a business model, it’s an ecosystem that grows even more valuable the deeper our customers go into it. Rather than being a target for disruption, we are the disruptor.
CEO Rick Smith.
That said, the stock’s still not conventionally cheap, even after the massive pullback. So any unexpected slowdown in revenue could cause a further sell-off. Regulatory risk around AI use in police reports could also increase.
Stepping back though, what we see here is that Axon’s underlying business is getting stronger while its share price is crashing. That’s the sort of disconnect that should interest long-term investors.
