The tech world is in a frenzy, and it's not AI that's crashing—it's software stocks taking a nosedive. But here's the twist: this sell-off might just be the golden opportunity investors have been waiting for. As fears of AI disruption grip the market, some software-as-a-service (SaaS) stocks have been unfairly punished, creating a buying opportunity that's too good to ignore. And this is the part most people miss: not all software companies are created equal, and some are poised to bounce back stronger than ever.
The AI Bubble Burst—Or Did It?
Heading into 2026, investors were bracing for an AI bubble to burst. But the real shock came from the software sector, not AI. The iShares Expanded Tech-Software Sector ETF (IGV), which includes giants like Microsoft, Palantir, and Salesforce, has plummeted 24% year-to-date through February 25. This decline has been fueled by concerns that AI advancements, such as Claude Cowork, will disrupt traditional SaaS models. While some of these fears are justified—given the sector's lofty valuations—others seem overblown, creating a unique opportunity for savvy investors.
Two Stocks Down, But Far From Out
Among the hardest-hit are Figma (FIG) and Axon Enterprise (AXON), down 74% and 40% respectively. But don’t let the numbers fool you—these companies are far from being down and out. Both have recently reported strong earnings and are aggressively integrating AI into their strategies, positioning themselves for long-term growth.
1. Figma: A Design Powerhouse with AI in Its DNA
Figma’s journey since its IPO seven months ago has been nothing short of a rollercoaster. After a stellar debut, the stock plummeted to just $20 per share, halving its market cap from the $20 billion Adobe offered to acquire it for in 2022 (before regulators blocked the deal). Despite this, Figma’s fundamentals remain robust. The company is not only growing rapidly but also boasts GAAP profitability—a rarity in today’s tech landscape.
Figma’s AI initiatives are particularly impressive. Products like Figma Make have seen weekly active users surge by 70% quarter-over-quarter. The company’s partnership with Anthropic, a leading AI startup, further underscores its commitment to innovation. For instance, Figma launched the Model Context Protocol (MCP) app in Claude and expanded its presence in ChatGPT with the Claude Code to Figma feature. These moves position Figma as a collaborator with AI startups, rather than a competitor.
In its latest earnings report, Figma posted a 40% jump in revenue to $303.8 million, with a staggering 136% net dollar retention rate. This indicates that existing customers are spending 36% more year-over-year—a testament to the company’s sticky product offering. While the stock remains pricey, its market share gains against Adobe and its forward-thinking AI strategy make it a compelling long-term play.
2. Axon Enterprise: Leading the Charge in Law Enforcement Tech
Axon Enterprise, known for its TASER weapons and body cameras, has long been a market favorite. Despite a 40% drop, the company’s recent earnings report highlights its resilience. Revenue soared 39% to $797 million, with adjusted EBITDA climbing 46% to $206 million. But what’s truly exciting is Axon’s AI playbook.
The company’s Draft One tool uses generative AI to create police reports from body and dashboard camera footage, streamlining a traditionally time-consuming process. Axon has also expanded its vehicle intelligence program with an automatic license plate recognition (ALPR) product and is leveraging AI to unify data across platforms, including its emergency response program.
Axon’s management isn’t just talking the talk—they’re forecasting $8 billion in revenue by 2028, implying a 30% annual growth rate. While the stock isn’t cheap, its dominant market position and innovative AI applications make it a standout in the software sector.
The Controversial Take: Are We Overreacting to AI Disruption?
Here’s where it gets controversial: Are investors overestimating the threat AI poses to traditional software companies? While AI is undoubtedly transformative, companies like Figma and Axon are proving that it can be a powerful tool for enhancement, not just disruption. By integrating AI into their core offerings, these firms are not only surviving but thriving in a rapidly evolving landscape.
Final Thoughts: A Buying Opportunity in Disguise
The software sell-off has created a unique opportunity to buy into high-quality companies at discounted prices. Figma and Axon, with their strong fundamentals and innovative AI strategies, are prime examples of stocks that could rebound sharply. But the question remains: Are you willing to bet on their long-term potential despite the short-term volatility? Let us know your thoughts in the comments—do you see this as a buying opportunity, or are you staying on the sidelines?
