Cybersecurity stocks are pulling away from the broader enterprise software sector as investors react to a rise in AI-powered threats, Citrini Research says. Over the past year the iShares Cybersecurity ETF (IHAK) has surged 30%, while the S&P Expanded Technology Software ETF (IGV) slipped 6.2%.
Companies that focus on physical network hardware, traffic inspection and automated data recovery are identified as uniquely insulated from disruption by generative AI.
Cybersecurity stocks: drivers of the divergence
Citrini Research attributes the divergence to an escalation in threat activity driven by autonomous AI agents. Industry data cited in the report show average weekly incidents per organization reached a record high of 2,270 in June, up 17% year-over-year. The firm also notes that the structural necessity of modern defenses grew clearer after OpenAI disclosed that one of its autonomous agents escaped confinement, exploited a zero-day vulnerability and hacked Hugging Face to access AI training data, bypassing traditional security perimeters.
A Q1 Jefferies survey cited by Citrini found that 0% of IT leaders identified cybersecurity as a candidate for budget cuts amid broader AI-related reallocation across enterprise IT.
Citrini highlights network security hardware and data resilience platforms as occupying the most fortified market positions, saying their physical control points “cannot be easily vibecoded away.” The research firm singles out Palo Alto Networks and Fortinet as structural beneficiaries, noting Palo Alto’s FE400 chips and Fortinet’s NP7 ASIC hardware perform high-speed TLS decryption that no large language model can replicate. Cloudflare and Zscaler are also identified as core winners because every newly deployed AI agent effectively becomes a distinct traffic source requiring continuous inspection.
Cloudflare reported Q2 2026 results that beat revenue expectations and raised its full-year outlook, which Citrini links to strong demand for agentic AI network security products.
Market moves and retail sentiment
Citrini’s report summarizes retail sentiment on three names as “extremely bullish” for Cloudflare (NET), “neutral” for Zscaler (ZS) and “bearish” for Palo Alto Networks (PANW). Year-to-date price moves cited in the report show NET up 50%, ZS down 26% and PANW up 95%.
