Cybersecurity stocks have seen strong gains lately, partly because of the ongoing debate about AI safety. J.P. Morgan has highlighted five companies in this sector that it views especially positively.
On Tuesday morning, CrowdStrike, Palo Alto Networks, Okta, Zscaler, and Varonis Systems traded mixed. This followed a rally the previous day, after new calls to slow AI development.
J.P. Morgan put all five cybersecurity companies on its list of stocks likely to benefit from strong earnings and ongoing AI-driven growth. The firm said that faster AI adoption is making cyber threats more widespread, which highlights the essential need for advanced security spending. J.P. Morgan also expects this trend to continue, even if the industry tries to slow down the development of advanced AI models.
J.P. Morgan estimates that AI adoption could lead to over $430 billion in extra cybersecurity spending in the next three years. Since security budgets already make up more than 10% of total IT spending, the current AI investment surge could mean even more money will go toward protecting AI systems.
J.P. Morgan highlighted CrowdStrike and Palo Alto Networks, the two biggest pure cybersecurity companies, for their wide range of platform offerings. Palo Alto Networks was also chosen as a Barron’s stock pick earlier this year. Okta is expected to benefit from rising demand for identity-management software as AI systems become more common. Zscaler stands out for its cloud-based security, and Varonis, a smaller company focused on data security, is seen as especially important as AI agents get more access to corporate data.
J.P. Morgan said that building more AI infrastructure is directly increasing demand for inspection and data protection tools. The firm expects this demand to become more visible in company results by the fourth quarter, with even faster growth likely through 2027, given the usual pace of enterprise sales.
