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Technology Investor, Visual Company Research
Software's risk/reward looks attractive, with rotation from semiconductors into software already under way. Strong Q2 earnings from leading enterprise businesses could keep that rotation going for names such as CrowdStrike, Guidewire, Snowflake, Palo Alto Networks, ServiceNow, Datadog, Veeva, Figma, Rubrik and Palantir. x.comÂ
Cybersecurity stocks such as CrowdStrike, Palo Alto Networks, Okta and Rubrik are set to be huge winners, after @kimmonismus relayed reports that the Mythos AI model allegedly breached almost all classified systems of the NSA and US Cyber Command within hours. x.comÂ
CrowdStrike, Palo Alto Networks, Zscaler, Fortinet and Okta could spike on fear stirred by Sam Altman's AI warning. x.comÂ
CrowdStrike, Palo Alto Networks, Fortinet and Okta offer terrible risk/reward because their valuations need a lot to go right. The thesis is correct: more AI agents mean more identities, endpoints and attack surfaces, so security spend should keep growing. But CrowdStrike trades at 147x forward earnings, Palo Alto at 79x, Fortinet at 44x and Okta at 41x. These are good, some exceptional, businesses, yet a great business can still be a terrible investment at the wrong price. x.comÂ
Palo Alto Networks, Fortinet, Okta and CrowdStrike benefit because data and data privacy are core ingredients of AI, making protection against cyberattacks essential. Per Chamath Palihapitiya and others on the All-In podcast, AI creates many opportunities for data leaks, a clear story behind cybersecurity's relative strength. Cyber companies also get special access to Anthropic's top Claude model, Claude Mythos, which gives them significant leverage. x.comÂ
Cybersecurity, the best-performing part of software this year, can keep rising as AI safety concerns emerge. Okta is up 116% year to date, Fortinet 113%, Palo Alto Networks 104%, CrowdStrike 99%, Datadog 69%, Cloudflare 67%, F5 61% and SentinelOne 50%. Every one beat on both revenue and EPS last quarter and trades above major technical supports. x.comÂ
Cybersecurity stocks such as Palo Alto Networks, CrowdStrike and Zscaler face a sea of red once pod shops absorb the AI-disruption risk, given the sector's valuations. Investors at Slow Ventures say they are increasingly convinced AI's first major victims will be these cybersecurity incumbents, whose security stack may not survive an AI-native threat world. x.comÂ
Zeta Global, ServiceNow, Datadog and CrowdStrike look increasingly attractive among software names as AI disrupts applications: businesses with proprietary data that build on AI and deliver intelligence and measurable outcomes could win. Cybersecurity valuations remain a concern. x.comÂ
Cybersecurity stocks catching a bid makes sense, because boards and CTOs will react strongly to cyber risks from agent proliferation. AI lab chiefs Dario Amodei and Sam Altman proving untrustworthy again also makes CTOs less willing to use their labs for cyber. The multiples are too high, though. x.comÂ
Benioff's enthusiasm and continued bullish promotion on CNBC suggest cybersecurity-stock sentiment is near a peak. Benioff could mark the top in security stocks, the inverse of Bezos's 2022 bottom tick. x.com x.comÂ
Cybersecurity stocks have a powerful long-term tailwind because more AI means more complexity, more attack surface and more need for security. CrowdStrike, SentinelOne, Palo Alto Networks, Zscaler, Fortinet, Okta and Rubrik moved up strongly premarket after Anthropic CEO Dario Amodei published an essay arguing the AI industry should slow down, with Anthropic committing to give third-party evaluators permanent access to verify its safety measures. The market may be connecting those dots. x.comÂ