Cybersecurity continues to be sold off due to concerns that the disruption of artificial intelligence will ripple through the market. But TheStreet doesn’t expect the new security tools included in Anthropic’s Claude AI model to reshape this space anytime soon, saying the reaction is more panic-based than reality-based. The iShares Cybersecurity and Tech ETF (IHAK) fell more than 3% on Friday after Anthropic announced Claude Code Security, which scans code for vulnerabilities and suggests solutions. Big cybersecurity companies like CrowdStrike and Cloudflare fell about 8% on Friday, while Okta fell more than 9%. Everything was under pressure again on Monday, with cybersecurity ETFs down another 4.7%, and CrowdStrike and Cloudflare each down more than 9%. UBS believes Claude Code Security has little overlap with the current revenue streams of major cybersecurity companies. Rather, the bank believes this stock decline was sold by investors worried that it means AI companies will do more work in the cybersecurity space and disrupt the business models of established companies. Analyst Roger Boyd doesn’t think so. CRWD OKTA, NET 5D Line 5-day chart of CRWD, NET, OKTA. “While we expect model companies to deploy more cybersecurity products, it is unrealistic to expect them to devote resources to building infrastructure controls such as endpoint agents, distributed security gateway networks (SASEs), and identity authentication platforms,” Boyd wrote in a Monday memo. AI companies will likely develop tools to make their models more secure and develop security operations agents, Boyd said. He added that cybersecurity companies such as CrowdStrike, Okta, and Zscaler could benefit from AI adoption. Month-to-date, CrowdStrike has lost more than 20% of its value, Octa is down nearly 18%, and Zscaler is down 28%. Given the indiscriminate selling within the sector, JPMorgan sees these companies as investment opportunities and said they are performing well amid the AI transition. Analyst Brian Essex also cited Palo Alto Networks, Sailpoint, Check Point Software Technologies, Netscope and JFrog as resilient companies. He noted that these names face high demand as companies aim to protect their cyber platforms from attacks and have strong existing networks and years of experience that are attractive to customers. Morgan Stanley reiterated its overweight rating on JFrog in a note Monday, noting that the company does not protect code like Anthropic’s new tools. Analyst Sanjit Singh wrote, “JFrog’s entire business and most of its security business revolves around storing, managing, and securing binaries – immutable files/artifacts (code is compiled into binaries) that run on servers so that end customers can actually run the software.” FROG YTD Mountain JFrog’s year-to-date chart. Singh said the decline in J-Frog stock was at least excessive, and urged clients to remain buyers of the stock. JFrog stock is down more than 36% since the beginning of the month. Wedbush analyst Dan Ives named CrowdStrike, Palo Alto Networks and Zscaler as long-term winners in cybersecurity. He also dismissed concerns that AI will disrupt the field. “The increased use of AI is significantly increasing the risk of the cyber threat environment by dramatically reducing the cost, skill, and time required to carry out sophisticated attacks, while significantly increasing their scale and accuracy,” he said in a Monday memo. “AI will be a major tailwind for the cybersecurity space in the coming years as use cases, data, and endpoint protection expand significantly.”
