Cybersecurity Stocks Pare Early-Week Gains — Analysts See AI Security Demand Building, But Valuations Raise The Bar

• OpenAI, Anthropic and Google have each disclosed incidents in which AI models gained unauthorized access to real-world systems during testing.
• Bernstein says demand signals remain positive but warns sector expectations have risen sharply.
• Morgan Stanley sees increased cybersecurity spending benefiting major vendors such as CrowdStrike and Palo Alto.

Cybersecurity stocks were broadly lower Friday, trimming part of a sharp early-week advance that followed renewed concern over the risks posed by increasingly autonomous artificial-intelligence systems.

At the time of writing, Zscaler Inc. (ZS) was down about 8%, Palo Alto Networks Inc. (PANW) and Okta Inc. (OKTA) were down about 3% each, and CrowdStrike Holdings Inc. (CRWD) was down roughly 1%.

The selloff follows substantial gains through Wednesday. From Sept. 18 through Sept. 23, Okta, CrowdStrike, Zscaler, Palo Alto and Fortinet (FTNT) stocks jumped between 5% and 12%.

Thursday brought the first signs of cooling, and Friday’s broader decline has pared more of the early-week gains, though the group remains on track for a second straight weekly advance.

Demand Is Improving, But Expectations Have Risen

According to a Bloomberg report, Bernstein said cybersecurity sentiment has turned positive, citing its mid-year chief information security officer and chief information officer surveys showing improving demand.

Analyst Peter Weed, however, warned the sector may have “gotten over its skis” as growth expectations accelerated. He cut his ratings on Palo Alto, Okta and SentinelOne. 

Trailing price-to-earnings ratios illustrate how wide the valuation spread has become.

Bernstein highlighted that many of the cybersecurity names it covers have risen roughly 100% or more since the start of 2026, and that crowding in the sector has increased significantly. Companies it previously considered “too cheap” now look fairly valued, it said.

Meanwhile, Morgan Stanley said CrowdStrike and Palo Alto are positioned to benefit from higher cybersecurity spending as AI safety concerns move to the forefront, according to The Fly.

Why AI Safety Is Driving The Trade

The renewed focus on cybersecurity follows several incidents involving frontier AI models.

Australian officials said this week that an OpenAI agent gained unauthorized access to a government healthcare-statistics portal in June. Researchers also identified attempted access involving the Australian Institute of Health and Welfare, the University of New Mexico and Data USA.

Anthropic separately disclosed incidents in which Claude models gained unauthorized access to real organizations during cybersecurity evaluations. Google also confirmed Gemini breached three companies during security testing.

In July, OpenAI models circumvented controls during internal cybersecurity evaluations, compromising parts of OpenAI’s research infrastructure and Hugging Face’s systems. 

OpenAI later called the episode a “warning shot,” saying highly capable AI agents can work around technical controls and take dangerous actions without sufficient safeguards.

AI to Drive Cybersecurity Spending

Analysts broadly expect AI to keep driving cybersecurity spending, but the sector’s sharp rerating has raised the bar. Bernstein’s surveys point to stronger demand, while Morgan Stanley and Stephens see continued opportunity from higher cyber spending and an expanding AI-driven security market.

Also read: NetApp To Acquire PEAK:AIO To Accelerate AI Infrastructure Push, Add Scale For Growing Workloads

For updates and corrections, email newsroom[at]stocktwits[dot]com<