Morgan Stanley says 4 cybersecurity giants will benefit from a $30 billion A.I. trend
Morgan Stanley has named four cybersecurity stocks it expects to gain from the increasing use of artificial intelligence. The investment bank said Palo Alto Networks , Microsoft , Fortinet , and CrowdStrike are set to benefit from a potential $30 billion opportunity AI is expected to unlock in cybersecurity. The need for AI and automation in cybersecurity has risen due to escalating global threats and a stark labor shortage in the industry, according to the International Information System Security Certification Consortium. Ransomware attacks have surged by over 30% year over year, Mogan Stanley said, and email phishing campaigns have significantly escalated since the introduction of chatbot ChatGPT. This trend indicates that there could be a cybersecurity workforce shortage of around 3.4 million people, according to the ISC. “With generative AI being used to create and mutate malware faster than ever before, we think this significantly increases the need for overburdened security organizations to invest in automation,” said Morgan Stanley analysts led by Hamza Fodderwala in a note to clients on June 28. The following table shows the four stocks’ consensus price targets from analysts and their upside potential. Generative AI helps improve productivity by automating routine tasks, such as data reporting and summarizing alerts, and frees up cyber security analysts to focus on more critical security concerns, according to the bank’s research. However, the analysts cautioned that this wouldn’t lead to a complete shift to automation. They also expect the rate of change in the cybersecurity field will be slower than in other IT areas due to the higher risks involved. PANW FTNT,CRWD 1Y line Initially, the bank expects companies to adopt a “co-pilot” approach where AI assists human operators rather than taking over completely. Humans will still be needed to make ultimate security decisions, they added. “While still early days and likely a net tailwind for the group, we think the most immediate beneficiaries are those with large, unique data sets across multiple threat vectors. Based on our framework … the leading beneficiaries include MSFT and PANW, followed by FTNT and CRWD,” the analysts wrote. They calculated their estimated $30 billion opportunity by talking to more than 20 chief investment security officers and IT security experts. They found that tasks that can be automated currently occupy between 20-40% of a security analyst’s time. If these tasks were automated, it could result in potential global cost savings of over $100 billion. “In terms of monetization, we expect between 10-50% of this value can be captured by 3rdparty vendors over time, resulting in our $34 billion potential [total addressable market] estimate when taking the midpoint of this range,” they added.
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