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In recent years, Baillie Gifford US Growth Trust has made big returns from S&P 500 stocks such as Tesla and Nvidia. The FTSE 250-listed investment trust has also had success with some unlisted holdings, notably SpaceX.
In 2026 however, the growth investor’s been picking through the software wreckage. The sector’s been hammered by fears that artificial intelligence (AI) will eat software. In the six months to February, the software and services sector delivered the worst underperformance versus the S&P 500 in 30 years!
However, Baillie Gifford US Growth Trust is convinced that “some babies have been thrown out with the bathwater“. So which beaten-down S&P 500 stock has it bought?
Enter Axon
In February, the trust took the opportunity to add Axon Enterprise (NASDAQ:AXON) to its portfolio. Since August, this stock’s crashed 52%.
Now, Axon isn’t exactly a household name. And with a $33bn market-cap, it’s not very large for the S&P 500 index.
For the record though, I’m very familiar with the company, having first bought shares a decade ago. And after rising roughly 2,100% in 10 years (even after the recent pullback), this position has long been among my largest holdings.
While its name might not be familiar to most, Axon’s products will be. It owns the Taser brand behind the bright yellow stun-guns that are synonymous with modern law enforcement. They’ve saved countless lives in the US by increasingly replacing bullets.
Meanwhile, Axon’s army of vehicle and body-worn cameras capture incredible amounts of video evidence, which is immediately sent to, stored. and analysed in its cloud platform. As such, Axon operates one of the world’s largest video/data repositories.
[Axon] combines devices, software and data into an integrated system that becomes hard to displace once adopted.
Baillie Gifford.
Data advantage
Rather than being threatened by AI, Axon’s using the technology to create cutting-edge software products. For example, Draft One uses body camera footage to automatically write initial police reports, saving individual officers huge amounts of time.
There’s growing public pressure to shift resources toward neighbourhood policing (tackle shoplifting, for example). Axon’s efficiency-boosting Draft One should play a role here, as its Workforce Mini body-cams are specifically for retail staff and security guards. They increase accountability, capture evidence, and potentially deter assaults.
Meanwhile, Axon’s Fusus platform allows local businesses to share their existing CCTV feeds. This allows police to see inside stores during an active crime.
In 2025, revenue rose 33% to $2.8bn, while bookings surged 46% to $7.4bn. Total future contracted bookings hit $14.4bn, providing significant revenue visibility for many years to come (contracts are often 10 years now).
After only one year, its suite of AI products attracted $750m in bookings in 2025. Crucially, this revenue’s defensible because upstart AI rivals can’t access Axon’s real-world data originating from vehicles, body-cams, drones, and more.
As AI increasingly commoditises software development, the companies with defensible positions are those that own the full stack, including hardware, and we do.
Axon CEO Rick Smith.
Now, the biggest risk here is a high valuation (55 times forward earnings). If growth slows faster than anticipated, the stock may crumble. Legislation in some US states could also slow AI adoption among police.
However, like Baillie Gifford, I think the 52% dip-buying opportunity is worth assessing closely.
