Shares of several cybersecurity companies moved lower on Wednesday following a Reuters report that Chinese authorities have instructed domestic businesses to stop using security software supplied by around a dozen firms based in the United States and Israel, citing national security risks.
Reuters said the guidance was circulated in recent days, although it remains unclear how widely it was distributed among Chinese companies. Regulators are reportedly concerned that foreign-developed cybersecurity tools could gather sensitive information and potentially transmit it outside the country.
U.S.-based companies mentioned in the report include Broadcom-owned VMware (NASDAQ:AVGO), Palo Alto Networks (NASDAQ:PANW) and Fortinet (NASDAQ:FTNT). Israel’s Check Point Software Technologies (NASDAQ:CHKO) was also named as being affected.
By 05:04 ET, shares of Palo Alto Networks were down 2.5%, while Check Point slipped about 1%. Fortinet fell 2.7%, CyberArk (NASDAQ:CYBR) dropped 1.2%, and Broadcom edged 0.4% lower.
According to the report, Chinese officials are increasingly worried that foreign governments could gain access to confidential data through Western-developed security software.
The move comes against a backdrop of ongoing tensions between Beijing and Washington, particularly in areas related to technology and data security. China has been actively encouraging the replacement of Western technology with homegrown alternatives as part of a broader strategy to reduce dependence on foreign suppliers.
While much of the focus has been on China’s push to strengthen its semiconductor and artificial intelligence sectors, the country has also been working to replace Western-made computer hardware and software across both government and corporate systems.
Chinese analysts cited by Reuters said concerns over potential foreign surveillance or cyber intrusions have become a growing influence on Beijing’s technology policy.