CrowdStrike briefly crossed above $500 a share Thursday for the first time since December, and Palo Alto Networks traded above $190 for the first time since January, as a rotation out of AI-infrastructure stocks pushed money into cybersecurity names.
Both companies are now in positive territory for the year, pulling away from the broader enterprise software sector at a moment when the popular iShares Expanded Tech-Software Sector ETF, ticker IGV, has weighed on software stocks broadly. That ETF has been used by investors fearful of AI disruption to bet against software companies, and both CrowdStrike and Palo Alto Networks are included in it despite operating in a segment of the market that analysts increasingly view as insulated from AI competition.
One analyst noted, as reported by MarketWatch, that investors are starting to see cybersecurity companies more as AI beneficiaries than as AI losers. The reasoning is that as artificial intelligence tools proliferate across enterprises, the attack surface for hackers grows, increasing demand for the kind of security platforms both companies sell.
Thursday's move came as the broader AI buildout trade took a breather. Stocks tied to AI infrastructure, including chip makers and data center suppliers, fell after what CNBC described as parabolic moves in many of those names. As that money moved out, software stocks, and cybersecurity names in particular, stepped in to absorb it.
The CNBC Investing Club noted that CrowdStrike and Palo Alto Networks have wider competitive moats than many of the other software companies caught in the IGV basket. The argument is that lumping them in with traditional enterprise software firms has created selling pressure that does not reflect the actual business dynamics of either company.
Elsewhere in the market Thursday, Arm Holdings was the session's biggest laggard in the CNBC portfolio after its earnings report Wednesday night failed to meet what analysts had set as an extremely high bar. Healthcare stocks also disappointed, failing to attract rotation money despite recent buying in Cardinal Health and Johnson and Johnson.
The S&P 500 retreated from record highs during the session, with losses accelerating in the afternoon after the Wall Street Journal reported that Saudi Arabia and Kuwait had lifted restrictions on U.S. military use of their bases and airspace, adding new uncertainty to negotiations over the Strait of Hormuz. The benchmark 10-year Treasury yield was nearing 4.4 percent. West Texas Intermediate crude climbed back above $97 per barrel after spending most of the morning lower.
For investors in CrowdStrike and Palo Alto Networks, Thursday's session marked a meaningful shift in how the market is categorizing them. Whether that reframing holds will likely depend on whether the AI spending cycle continues and whether enterprises keep prioritizing security budgets even as broader technology spending faces scrutiny.
