Here’s How Shopify (SHOP) is Thriving Through the AI Transition

Soumya Eswaran

Tue, May 19, 2026 at 8:19 AM EDT 4 min read

Baron Capital, an investment Management Company, released its first quarter 2026 investor letter for its “Baron Opportunity Fund”. A copy of the letter can be downloaded here. The Fund declined 8.88% (Institutional Shares) in the quarter, outperforming the Russell 3000 Growth Index’s (the Benchmark) -9.54% return, but trailing the S&P 500 Index, which dropped 4.33%. U.S. equity markets started the year positively, driven by investor enthusiasm for pro-growth policies like reshoring and AI. In February, sentiment shifted due to losses in software, business services, and info industries, driven by AI disruption fears. The sell-off intensified after the U.S. and Israel attacked Iran. Market trends showed rotation from the Magnificent Seven, software, and growth stocks into cyclical, defensive, and value segments. The Fund focuses on disruptive secular growth trends that generate profitable opportunities. The first quarter was challenging for the Fund with war, rising oil and inflation, AI fears, and sector rotations. In addition, please check the Fund’s top five holdings to know its best picks in 2026.

In its first-quarter 2026 investor letter, Baron Opportunity Fund highlighted stocks like Shopify Inc. (NASDAQ:SHOP). Shopify Inc. (NASDAQ:SHOP) is a Canada-based e-commerce technology company that provides a cloud-based platform for individuals and companies to create and manage their operations. On May 18, 2026, Shopify Inc. (NASDAQ:SHOP) closed at $102.39 per share. One-month return of Shopify Inc. (NASDAQ:SHOP) was -21.92%, and its shares lost 3.80% over the past 52 weeks. Shopify Inc. (NASDAQ:SHOP) has a market capitalization of $132.87 billion.

Baron Opportunity Fund stated the following regarding Shopify Inc. (NASDAQ:SHOP) in its Q1 2026 investor letter:

"While semiconductors and infrastructure are indisputable beneficiaries of the AI revolution, the software sector is experiencing its most dramatic valuation re-rating since the dot-com era. Year to-date through March 31, the median public software company declined roughly 25%, with multiples compressing to 10-year lows. This decline has been largely indiscriminate — driven not by deteriorating fundamentals but by fear that AI will disrupt software incumbents. We take these concerns seriously, but we believe the selling has created an analytical opportunity. Not all software companies face the same AI risk. Some will be disrupted, some will prove resilient, and some will emerge as significant beneficiaries. We have used this sell-off to upgrade portfolio quality and position the Fund in businesses that can survive and thrive through the AI transition —companies that are market-share leaders growing faster than competitors, with pricing models aligned to usage or outcomes rather than headcount, leveraging AI and proprietary data to compound their competitive advantages, and led by founders with the authority and willingness to self-disrupt.

Shopify Inc. (NASDAQ:SHOP) grew revenue 30% last year at nearly $12 billion in scale, with founders Tobi Lütke and Harley Finkelstein building the platform for agentic commerce. These stocks are down this year because the market sold the sector indiscriminately — yet all are bigger businesses, growing faster, with stronger competitive positioning than a year ago. We believe these are the types of companies that emerge intact on the other side of the AI transition — and at current valuations, the risk/reward is increasingly attractive."