Rich Peter
Investor, Crypto, US Stocks & High-Dividend ETFs
Legacy cybersecurity companies CrowdStrike and Palo Alto Networks are structurally threatened now that AI can autonomously breach classified systems. Per @BullTheoryio, citing The Economist and Senator Mark Warner, the NSA's director said Anthropic's Mythos broke into almost all of its classified systems in hours. Anthropic calls it a minor jailbreak, but open-weight orchestration should replicate Mythos-level autonomous penetration within months; compute has been weaponized. x.comÂ
Anthropic and OpenAI's inevitable move into cybersecurity threatens CrowdStrike and Palo Alto Networks' valuations. They look like the market's biggest bubble stocks right now; CrowdStrike trades at 40x ARR despite 25% growth and negative GAAP EBIT. x.com x.comÂ
CrowdStrike and Palo Alto Networks' strength is an ultra-overcrowded trade that is likely to flip this quarter. 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
Leading cybersecurity names Cloudflare, CrowdStrike and Palo Alto Networks look hard to own as AI threatens to collapse the industry. Together they generate $18bn of revenue on $550bn of combined market value, while Mythos has real potential to become the only cyber company anyone needs. x.comÂ
CrowdStrike and Palo Alto Networks are at all-time highs despite no real signs that AI is boosting cybersecurity, while Zscaler tumbled as mixed guidance overshadowed strong Q3 results. x.comÂ
CrowdStrike's selection for Anthropic's Project Glasswing shows where it sits in the cybersecurity ecosystem, making every dip a buy. Anthropic withheld Mythos, its most powerful model, from public release after it found thousands of zero-day vulnerabilities across every major operating system and browser, and is partnering with Amazon, Apple, Google, Microsoft, NVIDIA and others to secure critical systems. CrowdStrike and Palo Alto Networks are the only pure-play security firms chosen. x.comÂ
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
Microsoft is a relative beneficiary of slower, safety-focused frontier AI, mainly through cybersecurity, though to a lesser degree than CrowdStrike and Palo Alto Networks. Agentic AI risk from misbehaving internal agents and adversaries should make security every enterprise's top priority, driving upgrades to best-of-breed providers and much larger budgets. A paced frontier also lowers extreme tail risk for software broadly. Compute plans should not change, as supply stays severely constrained. … Show more
CrowdStrike's re-rating reflects a massively expanded market in which security seats are defined by AI agents rather than employees. The Mythos model announcement and a frontier model going rogue with cyber attacks changed the fundamentals since the stock was at $100. It is very expensive versus its history and peers, and @InvestingVisual notes it trades at 109x forward free cash flow, but that does not mean nothing has changed. x.comÂ
Hyperscaler cloud integration and frontier AI labs could take a fair bit of cybersecurity's economics. Rising AI-token budgets also make higher cyber spending a stretch. Palo Alto Networks, CrowdStrike and Cloudflare have nearly $1 trillion in market cap on less than $20 billion in revenue; even high-quality Palo Alto and Cloudflare look too expensive, while Okta looks indefensibly expensive. The theme has real demand, but these valuations look too high in the short to medium term. x.comÂ
