Here's why Palo Alto Networks and other cybersecurity stocks are now standout gainers

By Emily Bary

Analysts say investors were too quick to punish cybersecurity shares last week in the wake of updates about an upcoming Anthropic model

Palo Alto Networks' CEO recently scooped up $10 million worth of the cybersecurity company's stock.

Palo Alto Networks shares were leading the S&P 500 higher on Monday, while shares of fellow cybersecurity companies were seeing strong rallies as well. A few factors may help explain the big moves.

For one, Palo Alto Networks (PANW) CEO Nikesh Arora disclosed late Friday that he had purchased $10 million worth of his company's stock. That could be interpreted as a sign of his confidence in the company's business at a time when some investors are questioning how it will hold up against new artificial-intelligence innovations.

Palo Alto Networks didn't respond to a MarketWatch request for comment on behalf of the company or Arora.

See more: Palo Alto Networks CEO sends a message through his $10 million stock purchase

In general, cybersecurity stocks were bouncing in the wake of Friday's sharp selloff, which was attributed to fresh concerns about AI disruption. Morgan Stanley's Meta Marshall was among a number of analysts who weighed in with upbeat views of both Palo Alto Networks and CrowdStrike Holdings (CRWD), calling their recent declines overextended.

She flagged that Palo Alto Networks and others monitor threats while applications are running in real time, and the company charges customers accordingly. Investors worried that AI will pose a major threat to traditional cybersecurity models are missing "how much of cybersecurity is run-time-based, how high the accuracy needs are and how expensive token-based security would be," Marshall wrote.

Don't miss: These 4 cybersecurity stocks are Wall Street's favorite AI-proof plays

What's more, there was specific concern last week over a forthcoming Anthropic model that both offered cybersecurity features of its own and also offered unrelated features that may be so powerful that they could exploit vulnerabilities in current systems. Releases like that "are catalysts for more, not less, cybersecurity spending," Marshall continued.

Jefferies analyst Joseph Gallo added that "Anthropic appears to be prereleasing to cyber vendors (to improve the robustness of their codebases), which we view as a sign of partnership rather than competition and positive for overall cyber demand."

Palo Alto Networks shares were up more than 7% in midday action on Monday, while shares of fellow cybersecurity companies Zscaler (ZS) and Okta (OKTA) were each up more than 5%. Shares of CrowdStrike were up nearly 5%.

Marshall reiterated her top-pick status on CrowdStrike's stock - writing positively of the company's Falcon Flex offering, which provides flexible subscription pricing that she thinks will encourage customers to try out the company's broadening array of security products.

More from MarketWatch: Why CrowdStrike's stock just won another fan on Wall Street

Software stocks in general were rising on Monday, with the iShares Expanded Tech-Software ETF IGV up more than 2%. The S&P 500 SPX was gaining 0.2%, at last check.

-Emily Bary

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

03-30-26 1226ET