These 4 cybersecurity stocks are Wall Street's favorite AI-proof plays

By Christine Ji

While the broader software sector stumbles, cybersecurity platforms are emerging as essential infrastructure needed to channel rising traffic from AI agents

Okta's stock looks especially compelling from a valuation perspective, while analysts see other reasons to like shares of CrowdStrike, Palo Alto Networks and Cloudflare.

Against the backdrop of broader software pessimism, one corner of the sector is shaping up to be not merely a survivor of the artificial-intelligence revolution but also a major beneficiary of it.

Cybersecurity companies are providing critical governance services as autonomous AI agents become a greater portion of overall web traffic. Up to 40% of enterprise tasks could involve embedded agents by the end of 2026, up from 5% in 2025, according to Gartner. That could fundamentally reshape corporate cybersecurity needs, as new endpoints increase attack surfaces.

"Going forward, it'll be a hybrid world with humans and agents interacting together, and agents acting in concert with and communicating with other agents," Stifel analyst Adam Borg told MarketWatch. An explosion of agents means that organizations will now have to secure agent identities in addition to human identities, he said.

The iShares Cybersecurity & Tech ETF IHAK is outperforming the iShares Expanded Tech-Software Sector ETF IGV by a record 12.8 percentage points year to date, according to Dow Jones Market Data, as Big Tech companies spearhead an agentic-AI push.

On Monday, Microsoft (MSFT) announced Copilot Cowork, an agentic automation tool that can execute multistep workplace tasks in the Microsoft 365 suite. And on Tuesday, Meta Platforms (META) purchased Moltbook, a social-media platform for AI agents. Meanwhile, Amazon.com (AMZN) and other e-commerce leaders are building out agentic shopping tools.

With more agentic capabilities comes an elevated threat landscape, as bad actors can now weaponize AI to launch attacks with unprecedented speed and magnitude. Companies will need to invest in AI-enabled cybersecurity tools to combat AI-driven threats effectively, Borg noted.

However, while AI is a rising tide that will lift the cybersecurity sector, not all cybersecurity names are created equally. Competition is heating up as OpenAI and Anthropic are looking to develop AI-native cybersecurity products, Jefferies analyst Joseph Gallo wrote in a note last week.

Wall Street analysts say CrowdStrike Holdings (CRWD), Palo Alto Networks (PANW), Cloudflare (NET) and Okta (OKTA) are among those most likely to take advantage of surging cybersecurity demand.

                     Company                    Year-to-date stock performance  Forward EV/revenue multiple  5-year average EV/revenue multiple 
   CrowdStrike Holdings                        -5.8%                           17.6x                        18.7x 
   Palo Alto Networks                          -9.3%                           10.4x                        9.6x 
   Cloudflare                                  7.8%                            24.8x                        23.9x 
   Okta                                        -8.5%                           3.7x                         8.9x 
   iShares Expanded Tech-Software Sector ETF   -20.3%                          6.5x                         8.1x 
                                                                                                                                 Source: FactSet 

See more: Why Meta is buying Moltbook, a viral AI social network

CrowdStrike and Palo Alto Networks are platform providers, which means they integrate multiple security tools into a centralized interface. Both companies generate first-party data, which helps them defend against AI-native offerings from large language models, according to Borg.

Earlier this week, Morgan Stanley analyst Meta Marshall upgraded shares of CrowdStrike to overweight from equal weight, citing the company's durable 20%-plus revenue-growth potential and favorable AI tailwinds.

CrowdStrike's Charlotte AI offering, which integrates into the company's main platform to automate threat detection, has boosted average deal sizes "meaningfully," according to Marshall.

The overall industry faces "minimal risk of AI disruption," Marshall wrote, as cybersecurity requires real-time results and near-100% accuracy - characteristics that large language models today lack. While CrowdStrike's stock remains one of the most expensive in the sector, Marshall argues the premium is justified as the company, alongside Palo Alto Networks, can capture more market share as agentic AI accelerates the shift toward platform consolidation.

Read: Why CrowdStrike's stock just won another fan on Wall Street

Borg identified Cloudflare, whose products govern the data flowing between users and the web, as another potential cybersecurity winner. The stock surged earlier this year upon the introduction of OpenClaw, a personal-assistant agent that can autonomously take action on a user's local device. AI agents will generate more traffic for Cloudflare to monitor. They'll also require low-latency inference, which Cloudflare provides through its network of servers in 330 locations globally. This proximity allows AI agents to execute tasks with faster response times.

Identity-management platform Okta is also emerging as an agentic-AI winner following a strong earnings beat earlier this month. The company is aiming to grow its identity solutions into a comprehensive platform that covers the workforce, customers and now agents, which Jefferies's Gallo believes will massively expand Okta's total addressable market. While operating margins of 25.3% fell short of consensus analyst estimates for 26.4%, this is actually a positive sign that management is prioritizing business investments, Gallo wrote in a note following the company's earnings report.

There's also a valuation case to be made for Okta's stock, according to Gallo. While the previously mentioned cybersecurity stocks are all trading near their five-year averages, shares of Okta look historically cheap at 3.7-times forward revenues. That's less than half of their five-year average multiple of 8.9, and hovering near the five-year low of 3.2, according to FactSet.

Borg called Okta a "turnaround story" in which the potential reward outweighs the risks. While "it's unclear who will be the winner in securing nonhuman identity ... we think [Okta] has a fair opportunity," Borg said.

See more: Okta's stock rises as momentum in AI agents fuels an earnings beat

-Christine Ji

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03-14-26 0830ET