Cybersecurity stocks have been on fire this year, fueled by AI-driven spending and growing warnings from tech giants about the risks of increasingly powerful agents.
The First Trust Cybersecurity ETF (CIBR) reached an all-time high on Monday as the tech-heavy Nasdaq Composite (^IXIC) notched a fresh record.
The fund’s main holdings, CrowdStrike (CRWD), Palo Alto Networks (PANW), and Fortinet (FTNT), all sit near all-time highs. Those stocks have surged 132%, 131% and 97%, respectively.
Rubrix (RBRK), F5 (FFIV), and Cloudflare (NET) also sit near record highs after a strong rally this year as shown on Yahoo Finance’s AlphaSpace chart.
Alarm bells from leadership at Anthropic and OpenAI prompted a rally in cybersecurity stocks last month.
The surge in AI agent usage and the popularity of Meta’s (META) Muse have also highlighted the need for the industry.
“Agents going rogue is the biggest risk today,” Jay Chaudhury, CEO of Zscaler, told Yahoo Finance’s Brian Sozzi on Monday.
“Imagine an agent on your corporate network hacked or hijacked, or it goes rogue. They’re far more dangerous because they work at machine speed,” he added.
Increased attention on AI safety risks will be a major tailwind for cybersecurity spending, according to Morgan Stanley analysts, who have Overweight recommendations on Palo Alto Networks, CrowdStrike, and Okta (OKTA).
The firm expects corporate spending on cybersecurity software to grow by 23% annually through 2028, potentially accelerating to 33% annually if major cyberattacks spur new government mandates.
Cybersecurity stocks were dragged into the software sell-off earlier this year over concerns that AI would disrupt traditional business models.
The sector has instead benefited from the rise of agentic AI, which is driving increased demand for verification and authentication.
Over the summer, IBM (IBM) CEO Arvind Krishna warned that its enterprise customers had shifted spending away from traditional software in the most recent quarter.
Instead, they were spending on servers and memory amid “rapidly evolving, industry-wide cybersecurity concerns.”
Ines Ferre is a Senior Business Reporter for Yahoo Finance covering the US stock market, publicly traded companies, and commodities.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
Read the latest financial and business news from Yahoo Finance