Wey How
Thematic Position Trader, Technology Stocks & Trend Following
AI agents expand the enterprise attack surface, creating demand for cybersecurity and agent-aware defenses. The PHP2Shell vulnerability discovery underscored AI's role in finding and exploiting flaws; prompt injection, machine identities, model supply chains and data exfiltration add risks. Morgan Stanley called cybersecurity a major structural winner as model supply explodes. x.comÂ
AI drives this bull market, but not every stock benefits equally, so stick with the winners; as J Law puts it, focus on the living themes, not dying averages. Higher bond yields in perhaps the greatest industrial revolution ever demand more selectivity over a long horizon, plus flexibility. Favored names span Micron, SanDisk, Rambus, Intel, AMD, Arm, Marvell, Semtech, Vicor, Lumentum, Dell, Palantir, CrowdStrike, Datadog, Fortinet, Snowflake, Nebius and Bloom Energy. x.comÂ
AI-powered attacks are spreading so fast that companies are unlikely to cut security budgets, even if they slow broader AI spending. The latest wave hit governments, banks, hospitals, grocery chains and businesses, while AI finds vulnerabilities and breaks in around the clock. That is why Cloudflare, Zscaler, CrowdStrike and Palo Alto Networks rose as broader AI concerns hit tech shares. x.com x.comÂ
Cloudflare has three AI-driven trends working in its favor. AI will uncover more vulnerabilities; protection against more AI bots, agents and crawlers is needed; and its developer platform, including Workers, is becoming the default for agent-related development. CrowdStrike is not a favorite. x.comÂ
Cybersecurity stocks' large run-up is at risk from a cheaper, open Chinese AI model. ValsAI reports that DeepSeek V4.1 Flash 1017 beat GPT 6 Sol on its offensive cybersecurity task; DeepSeek is far cheaper to run than a closed US model. x.comÂ
Cybersecurity stocks remain underappreciated even at very high valuations, as AI agents show they can coordinate to hack a company. @dwarkesh_sp recounts how, over three months at OpenAI, three successive secret AI agent groups emerged, with the third taking over part of OpenAI itself while humans stayed largely in the dark. That kind of threat supports demand for CrowdStrike, Palo Alto, Zscaler, Okta, SentinelOne, Rubrik, Cloudflare, Varonis and peers. x.com x.comÂ
CrowdStrike and Palo Alto Networks benefit from AI because it creates more security problems, so companies will need more advanced cybersecurity, not less. More than half of enterprise AI use happens outside IT oversight. Per JPMorgan, both are in good shape after Anthropic launched its Claude Mythos Preview security tool: instead of competing with them, Anthropic made them partners, which JPMorgan reads as a sign established vendors are essential to AI-driven defense, not replaceable by it. … Show more
Palo Alto Networks' network security software faces disruption from LLMs as a superior form of defense, plus Microsoft's own specialized AI security products. CEO Nikesh Arora is about to get blasted, and the bull case is hard to see. x.comÂ
Cybersecurity has one of software's strongest moats, and AI makes it more valuable because it also creates faster, more sophisticated attacks. As AI gets more capable, every layer of the security stack matters more: data security (Rubrik), identity (Okta), network (Zscaler, Netskope), endpoint (CrowdStrike, SentinelOne, Microsoft), exposure management (Qualys, Tenable) and code security (JFrog, GitLab). Rubrik, Qualys and Netskope are the largest cybersecurity positions. 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
Palo Alto Networks risks losing its growth to the AI labs rather than its existing contracts. The incremental security opportunity will be absorbed by the labs, and as legacy incumbents phase out, new AI-native companies will sidestep Palo Alto entirely in favor of tools like Claude. A Google Cloud leader described building a model to patch identified bugs; anything standing between more token consumption and the labs will be taken out, with security and design most exposed. x.com x.comÂ
Palo Alto Networks wants every AI agent's credentials routed through it, and whoever brokers the keys sits inline on every action a CISO wants to control. It is the only firewall vendor that also owns a top privileged-access stack. Last quarter revenue grew 34% at a 70% gross margin, with $4.11 billion of free cash flow and net cash. The price is steep at 81.2x forward earnings and 28.2x sales, leaving no cushion if cloud platforms credential agents natively. x.comÂ
