The AI security sector is on track for rapid expansion, with analysts from Morgan Stanley forecasting the market could reach $45 billion in the near future. This growth comes as artificial intelligence simultaneously creates new vulnerabilities and new ways to safeguard systems.
Companies are focusing investments on two main fronts: AI for Security, which leverages AI to enhance cybersecurity operations, and Security for AI, which protects AI systems themselves. As cyber threats grow more frequent and regulations tighten, several cybersecurity firms are positioned to capitalize on the opportunity.
Palo Alto Networks (NASDAQ:PANW)
Palo Alto Networks is set to benefit from both early AI for Security initiatives and the expanding Security for AI market. According to Morgan Stanley, PANW’s strength across identity, data, and cloud security segments positions it well to offer value-added AI security solutions.
“As organizations increasingly adopt platform approaches to security, PANW is expected to be a primary beneficiary,” the analysts noted.
In its fourth quarter, Palo Alto Networks posted revenue of $2.54 billion, up 16% from the previous year, prompting several firms, including Truist and Rosenblatt, to raise their price targets. Following the results, Wedbush added the company to its Best Ideas List, highlighting confidence in PANW’s platform strategy.
CrowdStrike (NASDAQ:CRWD)
CrowdStrike is strategically positioned to gain from the automation of Security Operations Centers (SOCs), which Morgan Stanley estimates could unlock around $34 billion in IT budgets.
The research indicates that over 50% of AI security spending represents new investment, rather than a reallocation of existing budgets. CrowdStrike’s consolidated platform aligns with the industry trend toward integrated security solutions.
Several analyst firms, including Truist, DA Davidson, and Needham, raised their price targets after the company’s Fal.Con conference, which showcased CrowdStrike’s growth potential and management’s focus on AI, describing it as an “agentic revolution.”
Microsoft (NASDAQ:MSFT)
Morgan Stanley rates Microsoft as Overweight, calling it one of the companies “in the best position to benefit” from AI security spending.
The firm notes Microsoft is well-suited to capitalize on early AI security investments. Its expansive enterprise security portfolio addresses both AI for Security and Security for AI needs.
Recent developments include plans for a major AI datacenter in Wisconsin, over $30 billion committed to UK operations, and a renewed agreement with OpenAI. Truist Securities reaffirmed its Buy rating following these announcements.
SailPoint (NASDAQ:SAIL)
SailPoint focuses on identity security, a key aspect of the Security for AI ecosystem. Morgan Stanley cites research showing that 69% of companies now use more machine identities than human identities, with nearly half relying on 10 times as many.
These machine identities present unique challenges: 72% of respondents report they are harder to manage than human accounts, 60% are overprovisioned, and 72% are dormant but still active. SailPoint’s offerings aim to close this critical security gap.
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