Cybersecurity Stocks Poised to Benefit from Artificial Intelligence
Morgan Stanley Identifies Top Cybersecurity Stocks
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.
Rising Demand for AI and Automation 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, 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.
Generative AI Enhances Cybersecurity Productivity
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.
Co-Pilot Approach and Human Decision-Making
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.
Estimated $30 Billion Opportunity in Cybersecurity
Morgan Stanley analysts led by Hamza Fodderwala estimated a $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.
Top Beneficiaries and Potential Market Size
According to the analysts, the leading beneficiaries include Microsoft and Palo Alto Networks, followed by Fortinet and CrowdStrike. They also expect between 10-50% of the estimated market value can be captured by third-party vendors over time.
Consensus Price Targets for the Four Stocks
The following table shows the four stocks’ consensus price targets from analysts and their upside potential.