The Quiet Erosion of Valuation

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The year 2026 dawned with a nervous anticipation of bubbles, a collective fear that the latest innovations would swell into unsustainable excess. Yet, the froth has not gathered where most eyes were fixed—not upon the artifices of artificial intelligence, but within the very foundations of the software industry itself. A curious thing, this tendency of the market to misdirect our gaze, to offer spectacle where substance is waning.

The iShares Expanded Tech-Software Sector ETF, a vessel carrying the hopes and fortunes of many, has suffered a decline of no small measure, a quarter of its value surrendered to the currents of apprehension. Within its hold, giants such as Microsoft, Palantir, and Salesforce feel the chill. It is not a collapse, mind you, but a quiet erosion, a realization that even the most seemingly invincible enterprises are subject to the same laws of gravity as lesser concerns. The anxieties surrounding disruption by these very AI tools, once hailed as saviors, have become the instruments of this retrenchment, a tragic irony not lost on the seasoned observer.

Yet, amidst this general disquiet, there exist opportunities for the discerning investor, those who possess the fortitude to examine the wreckage with a clear eye. The market, in its haste to punish, often overreaches, casting aside valuable holdings at prices that defy rational calculation. It is in these moments, when fear reigns supreme, that true bargains are to be found. We shall consider two such instances, Figma and Axon Enterprise, companies that have been unduly chastened by the prevailing winds.

1. Figma: The Illusion of Permanence

Figma, a mere seven months into its public existence, has already experienced a lifetime of market vicissitudes. The initial exuberance, a predictable surge fueled by speculative fervor, has given way to a sobering descent. The stock now lingers at a price representing a halving of its initial valuation, a reduction to a sum once offered in acquisition, a deal thwarted by the regulators. A cautionary tale, this, of the impermanence of even the most promising ventures. The market, it seems, prefers the illusion of control to the reality of innovation.

The fears surrounding Figma, however, appear disproportionate to the underlying realities. The company continues to demonstrate robust growth and, crucially, has achieved profitability under generally accepted accounting principles. This is no mere speculative bubble, but a genuine enterprise with a viable business model. Furthermore, Figma has embraced the very technologies that threaten its competitors, integrating AI into its offerings with both boldness and foresight. It is a company adapting, evolving, and positioning itself for the future.

Recent financial reports confirm this trajectory. Revenue growth has accelerated, leaping by 40% in the last quarter to $303.8 million. Net new revenue reached a record high, and net dollar retention stands at an impressive 136%, indicating a strengthening relationship with existing customers. The company’s AI-powered tools, such as Figma Make, are experiencing rapid adoption, with weekly active users increasing by 70% quarter-over-quarter. The partnership with Anthropic, a leading AI research firm, suggests a strategic alignment that will benefit both parties. It is a dance of collaboration, not confrontation.

Figma’s projections for the coming quarter and year are equally encouraging, with anticipated revenue growth of 38% and adjusted operating income of $100-$110 million. While the stock remains expensive, its rapid gains in market share, particularly at the expense of Adobe, suggest a long-term growth potential that justifies the current valuation. It is a company poised to continue its ascent, provided it navigates the complexities of the market with prudence and vision.

2. Axon Enterprise: The Burden of Leadership

Axon Enterprise, a longstanding success story in the realm of law enforcement technology, has established itself as the clear leader in its niche. It is a position not without its burdens, for leadership demands constant innovation and a relentless pursuit of improvement. The company’s core offerings—TASER electrical weapons, body cameras, and software solutions for law enforcement agencies—have become indispensable tools for maintaining order and ensuring accountability.

Recent financial results confirm Axon’s continued strength. Revenue increased by 39% to $797 million, and adjusted EBITDA rose by 46% to $206 million. These are not merely numbers on a page, but indicators of a company delivering tangible value to its customers and shareholders. It is a testament to the effectiveness of its products and the dedication of its employees.

Axon has also embraced the potential of AI, introducing Draft One, a generative AI tool that automatically generates first drafts of police reports from body and dashboard camera footage. This is not simply a technological gimmick, but a practical application of AI that can save law enforcement agencies valuable time and resources. The company is also expanding its vehicle intelligence program with an automatic license plate recognition product and leveraging AI to unify data across its various platforms. It is a holistic approach to innovation, integrating AI into every aspect of its business.

Axon’s forecast to deliver $8 billion in revenue by 2028, implying annual growth of approximately 30% over the next three years, is ambitious but achievable. Even after its recent sell-off, the stock is not cheap, but the company’s strong competitive advantages and its commitment to innovation suggest that it is well-positioned to deliver rapid growth for years to come. It is a company that understands the importance of adapting to change and embracing new technologies. It is, in essence, a model of sustainable success.

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2026-02-26 06:33