Cybersecurity stocks are pulling away from the software sell-off, and AI is the reason Proactive uses images sourced from Shutterstock
Wall Street’s current skittishness about software stocks has a blind spot: cybersecurity. While broader tech has sold off, the firms protecting enterprises from digital attacks are seeing pipeline growth that analysts at Wedbush describe as running well above historical norms, and the driver is the same technology rattling investors elsewhere.
AI is simultaneously the threat and the tailwind.
Cybersecurity vendors typically set their year-over-year sales targets 12% to 18% higher than the prior year. Heading into 2026, those targets are up 25% to 30%, according to Wedbush’s channel checks. That acceleration is not happening in isolation. It reflects something structural: as companies race to deploy AI across their operations, they are expanding the surface area that attackers can hit, and those attackers are now using AI of their own.
The economics of launching a cyberattack have changed. AI has reduced the cost, the technical skill, and the time required to execute sophisticated attacks while dramatically increasing their precision and scale. Attack cycles that previously took weeks now take hours. Spear-phishing messages that once required native-language fluency and social engineering expertise can be generated at industrial scale. Malware can now adapt in real time to evade detection.
At the same time, enterprise AI adoption is creating attack vectors that did not exist a few years ago. APIs, cloud workloads, AI models, and data pipelines are all new entry points. Tactics like model poisoning, prompt injection, and data exfiltration from AI systems were not threats that legacy security tools were built to handle. The tools enterprises relied on a decade ago, or even five years ago, were simply not designed with any of this in mind.
This dynamic reinforces something security buyers already know: cybersecurity budgets are among the last to get cut. When the blast radius of a successful attack rises, the conversation about what to spend on protection becomes a lot less difficult.
CrowdStrike Holdings Inc (NASDAQ:CRWD) trades at $429.64 with a Wedbush price target of $600. Its central advantage going into this environment is that its Falcon platform was built around AI from the start, which makes it better suited than most to handle AI-driven adversaries.
The company’s AI Detection and Response approach addresses both sides of the enterprise AI challenge. It provides protection against AI-powered attacks while also securing the AI assets enterprises are building internally. As organisations invest in their own large language models and AI-driven workflows, those assets become targets, and CrowdStrike has positioned itself to guard both the perimeter and the underlying infrastructure.
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Wedbush views CrowdStrike as the gold standard of the sector, a designation the current sell-off has not changed.
Palo Alto Networks Inc (NYSE:PANW, XETRA:5AP), currently at $166.95 with a price target of $225, reports its quarterly results today, and Wedbush is expecting both strong numbers and a constructive outlook.
The knock on Palo Alto in some quarters has been that AI might erode its value proposition by automating tasks or enabling cheaper competitors. The Wedbush view is the opposite: AI is making the company more relevant, not less, because it is forcing enterprise customers to consolidate their security vendors, improve their visibility across environments, and automate their threat response. That is precisely what Palo Alto’s platformization strategy was built to deliver.
The company’s acquisition of CyberArk also closes a meaningful gap on the identity security side, which has become a critical front in AI-era threat management.
Zscaler Inc. (NASDAQ:ZS), trading at $177.72 against a price target of $350, has a structural argument that becomes more compelling the more AI traffic flows across enterprise networks.
Its Zero Trust architecture is designed to secure access to data, models, and applications regardless of where users or workloads sit. As enterprises push more AI-driven processes into cloud environments and extend access to remote workers and third-party systems, the question of who can reach what, and under what conditions, becomes central to security posture. That is Zscaler’s core competency.
Wedbush sees durable subscription growth and high renewal visibility as the key financial characteristics here, underpinned by an AI strategy and go-to-market operation that still has room to run.
What ties all three of these companies together is a macro thesis that is straightforward to follow, even if the technology underneath it is complex. Enterprises are adopting AI at pace. AI is expanding the attack surface and improving the capabilities of adversaries. That combination makes security spending less discretionary, not more, which is the opposite of what tends to happen to software in a risk-off market environment.
The sell-off in broader software has created a gap between where these stocks are trading and where the underlying business fundamentals point. All three carry Outperform ratings from Wedbush. Whether the market closes that gap quickly or slowly, the direction of travel in the security sector is not ambiguous.