Bernstein's Cybersecurity Reset
Cybersecurity stocks moved broadly higher all week as newly discussed AI risks push demand for cyber tools. CrowdStrike (CRWD), Palo Alto Networks (PANW), Okta (OKTA), and Zscaler (ZS) were all green. The driver is a note from Bernstein reacting to a weekend event: Dario Amodei urged a slowdown, or "pacing," in AI training.
Bernstein's ratings changes, all now landing at market perform on most names:
- Palo Alto Networks (PANW): downgraded to market perform from outperform; price target raised to $351 from $253.
- Okta (OKTA): downgraded to market perform from outperform; target raised to $174 from $143.
- SentinelOne (S): downgraded to market perform from outperform; target raised to $25 from $21.
- CrowdStrike (CRWD): kept at market perform; target raised to $132 from $119.
- Cloudflare (NET): market perform; target raised to $181 from $164.
- Fortinet (FTNT): market perform; target raised to $145 from $102.
- Zscaler (ZS): the only outperform rating in the group.
The note tracks cyber investor sentiment, which swung back to positive. Demand signals keep pointing up in midyear CISO and CIO surveys, helped by talk of a possible slowdown in AI lab progress caused by cyber risk. Since the start of 2026, many of Bernstein's covered cyber names have gained roughly 100%+, and crowding scores for the space rose sharply. That forced Bernstein to lift its price-target multiple regression by a couple of turns. Names it had found too cheap before - PANW, OKTA, S, and CRWD - now look fairly valued, so most targets went up while ratings went to market perform.
Zscaler (ZS) had been left out of some earlier cyber moves but joined the group that day, up a little more than 3%.
The CoreWeave Call
This was Bernstein's second note of the week. The first was an initial reaction to Amodei's open letter calling for a slowdown; it flagged sector-wide risk among AI names. This second note named the single biggest loser: CoreWeave (CRWV), because of its location. CoreWeave runs mostly rural sites. If AI training slows, companies with more inference locations - generally closer to urban areas - do better. Bernstein expects Equinix (EQIX), Digital Realty (DLR), and Switch to perform well thanks to their geography. CoreWeave (CRWV) fell over 5% that day.
CrowdStrike as the Standard Bearer
On CrowdStrike (CRWD) specifically: these companies gain from both sides of the AI buildout. The technology advances faster than we can understand it, and bad actors use that same technology to attack companies, so cyber demand rises either way. CrowdStrike had a strong last quarter with continued fast revenue growth, which supports it for the short and medium term. I like the defensive internet-security names as an important part of the AI trade.
The Fed and Rates
The Federal Reserve meeting the prior day went as expected, maybe slightly hawkish. The Fed pressed the point that it will get inflation under control. People had been skeptical the Fed would ever act on that, but right now the market is giving the new Fed and new governor the benefit of the doubt, thinking this time may be different. The Fed treats inflation as its number one target and is confident growth is stable and promising. The result is a flattening yield curve, with some longer-dated yields coming down - good news, since it signals the market expects inflation to fall over the long term.
Portfolio Construction
On handling high-beta cyber names in a market that reacts almost manically, hot and cold day to day: balance risk and keep it fully balanced. Being all in on the AI trade is risky, because even names that don't look like AI plays benefit from the buildout - industrials like Caterpillar (CAT) and other makers of big machines tied to energy consumption. Single-stock volatility is real, but the bigger pattern is daily rotation, into growth and out of growth, into value and out of value. A portfolio should hold both value and growth names. You can pick and choose your growth names, but going all in on AI is not the right move at this stage. Within the AI trade there are chip stocks, defensive cyber stocks, and industrials - many ways to play the buildout. You don't have to be all in on Nvidia (NVDA) to be in on the AI trade.
