Shares of major cybersecurity companies slid for a second straight session this week as Wall Street reacted to the rapid rollout of new AI tools aimed at software security.
The latest pressure followed Anthropic’s debut of a research preview of a security feature tied to its Claude AI model. According to the company, the tool can review software code, identify potential weaknesses, and recommend fixes. Anthropic is expected to outline additional enterprise-focused updates at an upcoming product briefing.
Zscaler and CrowdStrike each fell 10%, while Tenable and Netskope dropped around 12%. SailPoint lost 9%, while Okta declined over 6%. Fortinet and SentinelOne each retreated over 4%, while Palo Alto Networks slipped about 3%. Cloudflare, which had recently benefited from investor enthusiasm around automated bot technologies, fell more than 9%.
Exchange-traded funds (ETFs) tracking the sector also moved lower. The iShares Cybersecurity and Tech ETF declined 5%, while the Global X Cybersecurity ETF sank to its lowest point since 2023.
Industry executives pushed back against the notion that AI-driven tools could easily replace comprehensive security platforms. CrowdStrike chief executive George Kurtz addressed concerns in a LinkedIn post, arguing that scanning code with AI does not substitute for a full security infrastructure. He emphasized that preventing breaches requires a proven system designed to operate independently and withstand real-world attacks.
Palo Alto Networks’ Nikesh Arora expressed a similar view during a recent earnings call. He said he did not understand why some investors see AI as a threat to cybersecurity firms. In his view, customers are seeking more AI capabilities to strengthen and scale their defenses rather than abandon existing platforms.
The broader software market has already been unsettled by AI’s rapid advance. Tools capable of building applications and websites from simple text prompts have fueled questions about the future of traditional development workflows. Since January, Salesforce has lost roughly one-third of its market value. ServiceNow shares have dropped by 34%, while Microsoft is down 20%.
Now, cybersecurity firms appear to be facing similar scrutiny. Still, some analysts say the market reaction may be overdone. In a note to clients, analysts at Bank of America suggested that Anthropic’s new feature is more likely to affect companies focused specifically on code analysis, such as JFrog and GitLab, both of which saw sharp declines last week.
The analysts added that while AI can streamline certain tasks like code scanning, it currently lacks the oversight, authority, and consistency required to replace full-scale cybersecurity platforms.
As tech companies like D-Wave Quantum Inc. (NYSE: QBTS) roll out even more revolutionary tech solutions, markets are bound to be rattled even more as the disruption potential of these novel solutions becomes apparent.
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