Cybersecurity Turns From Doubt to Demand
The AI buildout has an underappreciated part: cybersecurity. Not long ago the worry was that AI would take over cybersecurity jobs, and many of these stocks fell under heavy pressure. The opposite has happened. Investors now want cybersecurity to protect against AI-driven attacks. CrowdStrike (CRWD) made a large move recently, and Okta (OKTA) rose too, with Goldman raising its Okta price target to 203 this morning. Price targets across these names are going up.
For anyone who feels they missed the entry, the runway is still long. Earlier this year, during what looked like a "SaaS apocalypse," cybersecurity names were thrown out along with everything else. That was a mistake, given how much AI spreads and how many new protection needs it creates.
One Size Does Not Fit All
Each name serves a different purpose, and they work together rather than compete. Palo Alto Networks (PANW) does not do exactly what CrowdStrike (CRWD) does. Think of a medieval castle with many walls of protection: the moat outside, the wall, the sentries inside. Cybersecurity works the same way - layered and complementary. That is why most of these names still hold strong bids. A rising tide is lifting the group.
Platformization and the Arms Race
Platformization is a more complete approach to guarding against creative AI hacks. Both CrowdStrike (CRWD) and Palo Alto Networks (PANW) fit this well. This is an evolving situation, and demand has not peaked yet. As AI keeps getting more sophisticated, protection must get more sophisticated too. It works like an arms race between AI and cybersecurity, especially when bad actors get hold of AI.
Fortinet and Owning the Full Suite
Fortinet (FTNT) has had a strong run year to date and year over year, with growth in products and billings. It is one of the latecomers to the sector. The holdings here are a trio: Fortinet (FTNT), Palo Alto (PANW), and CrowdStrike (CRWD), chosen carefully so they do not cannibalize each other and instead work well together. Fortinet is an important part of building complete protection - as complete as possible at this time.
No protection is ever total. A chief risk officer at a public company will never sign off at a board meeting claiming full protection against cyber threats; that would be career suicide. The honest position is that the company is working at it, knows there are always tweaks and improvements, and relies on these vendors working in concert to get closer to that goal.
How to Approach the Space Now
For a portfolio manager, every day is the first day - each morning the portfolio is reviewed as if starting fresh, asking whether owning these stocks at current levels still makes sense. The first thing to check is the balance sheets and income statements, because the approach uses a fixed-income philosophy even while picking stocks. On those measures, these names show higher quality than their competitors, and that quality protects the investor. Nobody is always right in this hard field, so the hedge is a strong balance sheet: if earnings take a hit, the balance sheet will not suffer.
