CRWD, PANW, ZS, Other Cybersecurity Stocks Fall Hard On New AI Scare — But Wall Street Isn’t Panicking Yet

• Investors are moving their money out of software stocks amid concerns that AI tools might reduce demand for niche enterprise tools.
• Top names, including Palo Alto Networks, Zscaler, Crowdstrike and Cloudflare, suffered significant stock declines last week.
• In the group, only Palo Alto has an ‘extremely bullish’ Stocktwits sentiment; PANW reported earnings last week.

Cybersecurity stocks were hit by a broad selloff last week, emerging as the latest casualty of mounting fears that new artificial intelligence (AI) tools are upending legacy business models and potentially eroding demand for niche software solutions. However, Wall Street is not yet completely shaken.

Palo Alto Networks, Inc. and Zscaler, Inc. stocks tumbled by over 10% each, leading the Nasdaq losers. SailPoint, Inc. dropped 10.8%, while CrowdStrike Holdings, Inc. and Cloudflare, Inc. dropped 9.6%. 

Part of the drop in Palo Alto’s stock was due to its weak quarterly report earlier in the week. The company reported third-quarter profit that missed expectations and trimmed its 2026 profit view.

Shares of enterprise software firms also fell, with Atlassian Corp., Datadog, Inc., Intuit, Inc., and Workday, Inc. sliding 4.6% to 10% in the week. Most of the losses came on Friday and were triggered by the release of a new security tool by Anthropic. 

The Amazon.com, Inc.-backed AI company launched Claude Code Security, which it said is designed to autonomously scan software codebases for vulnerabilities and recommend fixes – functions that are traditionally performed by a combination of human engineers and specialized enterprise software.

In internal testing, Anthropic reported that the tool uncovered more than 500 previously unknown high-severity vulnerabilities across widely used open-source projects.

Interestingly, the launch of Anthropic’s AI platforms – particularly Claude Cowork and a ‘Legal’ offering – kicked off the selloff in niche software stocks last month, which continues to this day. Coupled with concerns around eye-popping expenditure plans from Big Tech companies, investors appear to be shifting their money out of tech stocks.

So far this year, the iShares Expanded Tech-Software Sector ETF (IGV), which tracks software stocks, is down 25%, while the Invesco QQQ Trust Series 1(QQQ) and the SPDR S&P 500 ETF Trust (SPY) are down 2.8% and 0.2%, respectively.

Not all analysts are bearish, though. In an investor note summary on The Fly, Barclays said the selloff in cybersecurity stocks “seems incongruent”, arguing that Anthropic’s tool does not directly replace the core offerings of major cybersecurity vendors. The research firm said that the tool is not a threat to firms such as SailPoint, Cloudflare, CrowdStrike, and Palo Alto Networks.

Wedbush analyst Dan Ives recently reinstated Salesforce and ServiceNow to his influential AI-focused stock watchlist, signaling renewed confidence in the companies amid their stock selloff.

On Stocktwits, the retail sentiment was ‘extremely bullish’ for Palo Alto, ‘bullish’ for CrowdStrike and Zscaler, ‘neutral’ for SailPoint, and ‘bearish’ for Cloudflare.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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