Cybersecurity continue to sell off as artificial intelligence disruption fears ripple throughout the market. But the Street doesn’t expect the new security tool within Anthropic’s Claude AI model to reshape the space anytime soon, saying the reaction is more panic-driven than based in reality. The iShares Cybersecurity and Tech ETF (IHAK) fell more than 3% Friday after Anthropic debuted Claude Code Security, which the company says scans code for vulnerabilities and suggests solutions. Major cybersecurity names like CrowdStrike and Cloudflare shed around 8% on Friday, while Okta tumbled more than 9%. All were under pressure again on Monday , with the cybersecurity ETF down another 4.7%, while CrowdStrike and Cloudflare each lost more than 9%. UBS thinks Claude Code Security has little overlap with the current revenue streams of major cybersecurity companies. Rather, the bank thinks the sell-off has been driven by investors concerned this means AI companies will do more work in the cybersecurity space and disrupt already-existing companies’ business models. Analyst Roger Boyd doesn’t think that will be the case. CRWD OKTA,NET 5D line CRWD, NET, OKTA 5-day chart. “While we expect the model companies to introduce more cybersecurity products, we don’t think it’s realistic to think they will devote resources to building infrastructure controls like endpoint agents, distributed security gateways networks (SASE), or identity authentication platforms,” Boyd wrote in a Monday note. AI companies are likely to develop tools to make their own models more secure and develop security operations agents, Boyd said. He added cybersecurity companies such as CrowdStrike, Okta and Zscaler may benefit from AI adoption. Month to date, Crowdstrike has lost more than 20% of its value, Okta is down nearly 18%, while Zscaler has shed 28%. With indiscriminate selling within the sector, JPMorgan sees those same companies as investment opportunities, and said they are doing well amid AI shift. Analyst Brian Essex also named Palo Alto Networks , Sailpoint , Check Point Software Technologies , Netskope and JFrog as resilient. He noted these names are facing high demand as companies look to defend their cyber platforms from attacks, and have strong existing-networks and years of experience that make them appealing to clients. Morgan Stanley in a Monday note reiterated its overweight rating on JFrog, noting the company doesn’t secure code like Anthropic’s new tool. “Most of JFrog’s overall business, as well as its security business, is tied to storing, managing and securing binaries – the immutable files/artifacts (code gets compiled into binaries) that run on servers so that end customers can actually execute the software,” wrote analyst Sanjit Singh. FROG YTD mountain JFrog year-to-date chart. Singh said that the sell-off in JFrog, at least, is overdone and encouraged clients to remain buyers of the stock. JFrog shares are down more than 36% month to date. Wedbush analyst Dan Ives named CrowdStrike, Palo Alto Networks and Zscaler as long-term winners in the cybersecurity space. He also brushed off fears that AI will disrupt the sector. “The increased use of AI is significantly elevating the cyber threat environment risks as it has dramatically lowered the cost, skill, and time required to execute sophisticated attacks while seeing massive elevation in increasing their scale and precision,” he wrote in a Monday note. “AI will be a major tailwind to the cyber security sector over the coming years as protection of use cases, data, and end points expand markedly.”
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Tuesday, September 22
