A couple of times in recent years, I’ve had to trim back my holding in Axon Enterprise (NASDAQ: AXON) to stop it absolutely dominating my Stocks and Shares ISA.

A quick glance at the share price chart shows why. It’s now risen by 757% in five years, at an average annual compound rate of about 54%!

Without doubt, this has been a nice problem to have. I’ve been able to deploy some harvested gains into other stocks that have also done well, including Rolls-Royce and Taiwan Semiconductor Manufacturing (TSMC).

Admittedly, there have been some bad picks, such as additions to Moderna and Diageo. However, a single massive winner over time will often more than compensate for many losers.

The weeds wither away in significance as the flowers bloom. Over time, it takes just a few winners to work wonders.

Warren Buffett

Dilemma

My new ‘problem’ is that the Axon share price has basically gone up vertically in recent months.

Once again, it’s dominating my ISA, leaving me with a bit of a dilemma. Namely: do I sell more shares or leave the position alone?

The growth stock is valued at an eye-watering valuation, yet that was also the case when I last reduced my holding. Since then, it’s more than doubled, meaning I’ve missed out on even more returns.

Of course, I wouldn’t be thinking like this if the stock had fallen 50% recently. I’d be patting myself on the back, proud at my discipline and skills in portfolio risk management.

Law enforcement giant

Axon is the company behind the famous yellow Tasers, as well as the bodycams that many police officers wear. However, this hardware is normally bundled with software (recurring revenue), providing access to its cloud-based evidence management system (Axon Evidence).

It has a near-monopolistic position in its industry, achieved through relentless innovation. This was on display in Q3, as it highlighted growth opportunities in virtual reality training, robotics, and using drones as 24/7 first responders to incidents.

Revenue jumped 32% year on year to $544m, with operating cash flow rising 45% to $91m. Full-year guidance was upped slightly to $2.07bn (32% growth).

However, it was the commentary on artificial intelligence (AI) that was really exciting. Police officers spend up to 40% of their time writing reports (not what most signed up for).

Therefore, I expect its new Draft One product to be a smash hit with customers. This is an AI-powered tool that automates police report writing, using bodycam audio to generate draft reports in seconds, saving officers vast amounts of time.

Axon will let customers subscribe to an expanding set of AI capabilities and features. Essentially, what it’s offering here is AI-as-a-service, and it could be another huge long-term revenue driver.

I’m letting it run

One risk is that Axon is targeting more growth with federal agencies. However, this is a very competitive landscape where it faces established defence contractors and technology firms vying for federal contracts.

Plus, I expect volatility in the share price if there’s a market sell-off.

Looking ahead though, I think law enforcement will be well-funded under Donald Trump, benefitting Axon.

Weighing things up, I’m going to leave the holding alone for now. I think it’s set up for more gains over the long term.