Why Cybersecurity Stocks Look Built for the Next Big Spending Cycle

Anthropic’s Claude Mythos might have cybersecurity investors on pause, but I think it’s far too early in the game to count out the likes of CrowdStrike (NASDAQ:CRWD) or Palo Alto Networks (NASDAQ:PANW | PANW Price Prediction) out of the game, as they look to ready for what could be a massive spending cycle as the enterprise looks to view end-to-end security as an absolute must in an era where the risks of cyberthreats at arguably at an all-time high. 

Even JPMorgan (NYSE:JPM) top boss Jamie Dimon thinks Mythos has pulled the curtain on “a lot more vulnerabilities” for threats. In some ways, the advanced AI is making it easier to detect and patch bugs in existing software. But, at the same time, the tech could be used to exploit missed spots.

Either way, time will tell if all the bugs Mythos is uncovering can be fixed in time before threats level up with AI powers of their own. Either way, I do agree with Dimon in that we could be entering an era where every firm will need to prioritize cybersecurity. A more proactive approach seems like a must, especially once hackers inevitably get their hands on similar dangerously powerful AIs.

The case for AI as a tailwind for cybersecurity platforms

In any case, I’d argue that the Mythos story should be fuelling a gain in CrowdStrike and Palo Alto Networks, rather than causing a vicious sell-off. In my view, cybersecurity stocks belong in their own category, perhaps outside of software.

As to whether enterprises listen to Dimon on cybersecurity remains the big question. Either way, I think there’s no stopping a cybersecurity defense spending cycle as the AI wars move into an environment where the risks are simply too great to run the risk of falling behind, even by the slightest margin.

Now that Mythos has landed, it’s crystal clear that cybersecurity is a battle that’s won by the firm with the most capable AI. And when it comes to CrowdStrike and Palo Alto, I think both firms are ready to meet the growing demand as cybersecurity turns into a battle between agents.

While Anthropic is smart to limit the release of its Mythos model to the most trusted firms, I ultimately think that similar tech is well on its way and that we might begin witnessing widespread AI-driven cyberattacks of considerable scale. The more such breaches hit the headlines, the more momentum that the cybersecurity firms will get. If Mythos is a weapon in the cyber wars, there is perhaps no better wielder of it than CrowdStrike of Palo Alto Networks. 

Don’t discount the firms aboard the Glasswing coalition

In a prior piece, I highlighted CrowdStrike as a winner from the rise of Glasswing. It has an exclusive seat at the table, and investors can be sure that the firm is making the most of widening its moat for the threats to come. At this juncture, I think that investors are underestimating the tailwind of CrowdStrike and the rest of the cyber plays, as AI acts as a double-edged sword, as Dimon suggested.

Any way you look at it, the cybersecurity firms are going to be busy in the coming months. As investors contemplate whether AI is a massive tailwind or an existential threat, I think it’s time to think about adding to a position while “software” is still down and out.