Fund Capitalizes on Axon Enterprise (AXON) in AI-Related Selloff

Baron Capital, an investment management firm, detailed its second-quarter 2026 investor letter for the Baron SMID Cap ETF in a release on September 16, 2026. Baron SMID Cap ETF (BCSM) experienced a 15.62% gain (NAV) in the second quarter, trailing the Russell 2500 Growth Index's 24.02% return. The AI sector remained a focus, with successful investments in chipmakers, power equipment, and AI data center financing.

The fund's underperformance was attributed to its underweight stance in Momentum and Beta factors, per MSCI Barra factor attribution. The top 10 holdings comprised 29.3% of assets. Baron Capital identified Axon Enterprise, Inc. (NASDAQ:AXON) as a new position in its Q2 2026 investor letter. Axon Enterprise, Inc. (NASDAQ:AXON) is a public-safety technology company specializing in law enforcement products and services, including taser, body camera, drone, and other hardware solutions.

The company aims to reduce fatal outcomes in law enforcement confrontations through non-lethal Taser devices, digital body cameras, drones, license plate readers, cloud-based software, and virtual reality training. Baron Capital stated that Axon Enterprise, Inc. (NASDAQ:AXON) is a market-leading software provider with a competitive moat, and they believe there is an opportunity to more than double their investment over five years at current prices.

The fund does not consider Axon Enterprise, Inc. (NASDAQ:AXON) among its top 40 most popular stocks among hedge funds, but acknowledges the potential of other AI stocks with less downside risk.