Fears that artificial intelligence would swallow the software industry have reversed course in less than a year. As AI proliferation amplifies security threats, cybersecurity companies are setting record highs across the board. On the New York Stock Exchange, Palo Alto Networks (NASDAQ: PANW), CrowdStrike Holdings (NASDAQ: CRWD), and Fortinet (NASDAQ: FTNT) all closed at all-time highs on the 6th (local time).
Palo Alto Networks finished up 3.23% at $419.91 (approximately 560,000 won). CrowdStrike rose 2.27% to $278.86 (approximately 370,000 won), and Fortinet gained 3.88% to close at $191.27 (approximately 260,000 won). In after-hours trading, Palo Alto and Fortinet extended gains by 0.22% and 0.33%, respectively.
The First Trust Nasdaq Cybersecurity ETF (NASDAQ: CIBR), which tracks the broader cybersecurity sector, also closed at $108 (approximately 150,000 won), marking a record high.
From “SaaS Death” to AI Security Beneficiary
The rebound in cybersecurity stocks was difficult to foresee just months ago. Earlier this year, the term “SaaS death” — or “SaaSpocalypse” — spread rapidly through markets, reflecting the view that AI would replace the role of software. The concern was that if companies could use AI to build applications cheaply in-house, traditional software vendors would lose ground.
The S&P 500 Software & Services Index plunged more than 26% from late January to its April low. Cybersecurity companies were not spared. These firms, which defend SaaS applications from cyber threats, were swept up in the broader software sell-off. The First Trust Nasdaq Cybersecurity ETF fell to $60 (approximately 81,000 won) in March, its lowest level of the year.
But the situation reversed quickly. The hacking of OpenAI’s Hugging Face and other incidents demonstrated that AI agents can now execute cyberattacks without human direction, reigniting interest in security. Meta’s user-friendly AI “Muse,” which sends emails and books restaurant reservations on behalf of users, also raised concerns about excessive data sharing, underscoring the importance of security.
Institutions Raise Price Targets Across the Board
Major Wall Street investment banks are issuing increasingly bullish outlooks on the cybersecurity sector. Analysts at Morgan Stanley, TD Cowen, and Bank of America all raised their price targets on Zscaler (NASDAQ: ZS), the world’s largest cloud-based security platform, on the 7th. Zscaler shares closed up 0.6% at $213 (approximately 290,000 won).
Morgan Stanley analyst Meta Marshall said, “AI safety concerns will accelerate upside in cybersecurity.” Morgan Stanley projects enterprise cybersecurity software spending will grow 23% annually through 2028.
Zscaler CEO Jay Chaudhry pushed back on the “SaaS death” narrative in a CNBC interview, arguing that the term is overblown and that cybersecurity demand will rise as AI model adoption expands.
According to financial data provider LSEG, consensus earnings growth estimates for the cybersecurity sector have risen from 13.8% in late March to 20.6% — a sign of how quickly market expectations are improving.
From AI Infrastructure Dominance to Stock Selection
The surge in cybersecurity stocks is also being viewed as part of a broader rotation of AI-related capital from infrastructure to applications and security. According to research from Bespoke Investment Group, AI-related stocks on the New York Stock Exchange have risen 49% this year through the 5th. But the dispersion beneath the surface is stark. AI infrastructure stocks, including AI server developers, have surged 83%, while companies that use AI have gained just 2.5%.
The Nikkei reported that investors are turning their attention to cybersecurity as the next AI trade, noting that “the market is moving beyond indiscriminate selling of SaaS companies toward selective positioning in companies that can grow in the AI era.”
The broader software sector rebound is also evident. The S&P 500 Software & Services Index rose 1.3% on the 6th, its highest level since November of last year. The iShares Expanded Tech-Software Sector ETF (IGV) also gained 1.3%, extending its winning streak to five consecutive sessions. In the third quarter (July–September), the S&P 500 Software & Services Index posted its strongest quarterly gain since Q2 2020.
Adam Turnquist, chief technical strategist at LPL Financial, said, “AI has been more of an enabler than a disruptor for many software companies,” adding that “software has room to outperform semiconductors.”
That said, the software sector’s gains still pale in comparison to semiconductor stocks. The S&P 500 Software & Services Index is up 5% this year, a far cry from the Philadelphia Semiconductor Index’s 87.5% surge over the same period. Brian Mulberry, senior strategist at Zacks Investment Management, cautioned that the real test will come in the second half of next year, when expanded data center capacity could make AI coding a greater threat to traditional software companies.
