Step aside, Micron (MU) and SanDisk (SNDK). There’s another hot sector in tech besides memory chips.
Somewhat under the radar, cybersecurity stocks have fallen back into favor with investors. And it makes a ton of sense.
Inside the action: CrowdStrike (CRWD) is up 45% in a month, Palo Alto Networks (PANW) has gained 40%, and SailPoint (SAIL) is up 41% as Wall Street analysts have become more bullish on the space of late.
While these stocks have been hit over the past year amid fears that artificial intelligence models from Anthropic (ANTH.PVT) would render their businesses obsolete, there appears to be a narrative shift underway.
Analysts at Wolfe Research put it best in a recent upgrade on CrowdStrike. They believe Anthropic’s Mythos AI model is a catalyst for a new wave of AI-driven cybersecurity demand.
It’s a view shared elsewhere on the Street.
“We believe the market is underestimating both the expanding attack surface created by enterprise AI adoption and the limitations preventing fully autonomous security operations,” Evercore ISI analyst Peter Levine wrote in a new note. “AI is already driving meaningful disruption across vulnerability discovery, red-team testing, exploit analysis, and malware research workflows, accelerating both offensive and defensive cyber capabilities. We [have] heard vendors with early access to frontier models (Palo Alto Networks and Crowdstrike) likely benefit from faster remediation cycles, improved developer productivity, and tighter integration between vulnerability discovery and production-level protection.”
The outlook: Global cybersecurity spending, estimated at $220 billion by McKinsey, is forecast to grow 13% annually.
“Enterprise AI has entered the agentic phase, in which autonomous systems independently perform complex tasks at machine speed,” the researchers at McKinsey said. “After a wave of pilots in AI-assisted workflows, organizations are beginning to deploy agents across their infrastructure, identity, engineering, and security environments. Over the next 12 months, companies expect the share of fully implemented agentic AI solutions to more than double. As enterprises embrace AI agents, the surface for potential cyberattacks expands.”
They added, “The value for cybersecurity providers lies in incorporating more AI features and addressing enterprises’ growing agentic-related security problems across identity systems and detection and security operations. In particular, three challenges stand out: identity and access management (IAM) architectures, detection, and automation of security operations.”
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