LIVE MARKETS-Cybersecurity firms may be immune to AI disruption amid software sell-off

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CYBERSECURITY FIRMS MAY BE IMMUNE TO AI DISRUPTION AMID SOFTWARE SELL-OFF

Amid a sharp sell-off in global software shares this week, Berenberg analysts argued that AI disruption to cybersecurity companies may not be the case.

The brokerage says AI presents an opportunity, not a risk, for leading U.S. cyber vendors, including Zscaler ZS.O, Okta OKTA.O, CrowdStrike CRWD.O, SailPoint SAIL.O, Rubrik RBRK.N, and SentinelOne S.N.

AI is reshaping the security landscape in three ways: it is leading to an increase in 'attack surface'; cyber criminals are leveraging AI; and organizations are harnessing AI to strengthen their defense capabilities in the 'AI-versus-AI' arms race," analysts at Berenberg wrote.

"We believe concerns that AI disrupts software are largely unfounded for cybersecurity companies," the European brokerage said.

Investors selling AI-related stocks shifted into less pricey companies that sat out the tech rally in recent years.

The brokerage also noted the sector's resilience, with cybersecurity budgets set to increase in 2026, driven by identity, data, and cloud security as spending pillars.

"More importantly, we do not envisage any disintermediation risks for cybersecurity platforms from agentic AI; rather, the rise of agentic AI materially expands the total addressable market (TAM). Network effects and ecosystem moats for cybersecurity vendors are hard to replicate for any AI toolkit start-up," notes Berenberg.

CHINESE SOFTWARE FIRMS RESILIENT VS US

In a separate note, HSBC said that Chinese software stocks remain resilient compared to U.S. stocks, while Indian IT services may be at risk of a sustained sell-off.

Chinese software stocks have outperformed U.S. peers by about 40% since the start of 2025, even as U.S. software firms have dropped 29% year-to-date.

The brokerage said China’s software market is proving more resilient than peers, citing still‑low SaaS penetration, Beijing’s xinchuang‑led push to replace foreign suppliers, and a platform‑centric ecosystem where AI is expected to reinforce the dominance of super‑apps rather than disrupt them.

(Akriti Shah)

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